(ConservativeHub.com) – On May 1, the Biden administration’s new mortgage plan which would increase the fees for borrowers with good credit so as to cover some of the costs for bad credit borrowers, went into effect. Some have criticized this plan noting that it resembles the 2008 financial crisis, which in large part was caused by subprime mortgages collapsing.
A group of senators led by Marco Rubio, R-Fla., and Roger Marshall, R-Kan., sent a letter to Sandra Thompson, Federal Housing Finance Agency (FHFA) Director, near the end of April, in which they said that the proposal being enforced flaunts “credit risk.” They also called it “staggering” that the FHFA would be pushing this just 15 years after the 2008 crash.
This plan has been criticized by leaders in the mortgage industry, some of whom have said that those with a credit score over 680 could see an increase of $40 per month in a $400,000 mortgage. This is because, under the new plan, lower-income borrowers with low credit scores will benefit from lower fees that are offset by higher-income and credit-rating individuals who will pay higher fees than before.
This is not the first time that the government has attempted to implement a plan that would help lower-income borrowers who would otherwise struggle to qualify for a mortgage. For over a decade starting from the early 90s, the government had attempted to relax mortgage underwriting standards in an effort to help increase homeownership rates. However, this led to many under-qualified buyers being unable to make their mortgage payments, which ultimately resulted in them defaulting. The continuous defaults are widely believed to have been the starting point of one of the worst financial crises in U.S. History.
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