Story by Brandon Weichert
In 2003, the George W. Bush Administration attempted to create a new regulatory capability for the government to rein in what then-President Bush and his team saw as a threat to the fundamentals of America’s economy: Fannie Mae and Freddie Mac.
Worried that the public-private lenders were engaged in risky lending practices for political purposes, Bush’s team wanted to force the lenders to get more disciplined. Democratic Representative Barney Frank of Massachusetts fought Bush on it and won.
A few short years later, Fannie and Freddie helped to bring the US economy to its knees during the subprime mortgage crisis of 2008.
Fifteen years after the worst economic downturn since the Great Depression, as the US economy under President Joe Biden teeters on the brink of another recession, the Democrats want to get the US government back into risky home loans again.
Joe Biden Breaks the Bank to Save His Political Skin
The Biden Administration shepherded a change to the FHFA home loan rules that went into effect on May 1. This rule would effectively increase the costs on potential home purchasers with good-to-great credit scores so that possible home buyers with subpar credit scores can have a chance at purchasing a home. The rules would make it so that those home buyers with strong credit and a relatively low down payment would get hosed with higher-than-normal fees taken out over the duration of the loan.
Basically, if you are a first-time buyer of a home with a credit score of 680 or higher and are bringing forward a small down payment on a 30-year loan, you will be charged in ways that people doing the same thing as you a month ago wouldn’t be charged.
A house purchased at $400,000 with a purchaser who was a credit score of 680 and is putting forward the least amount of money possible for a down payment (which are many buyers, given the shabby economy in which most workers haven’t had a pay raise in years) will be paying upwards of $14,000 more over the course of their 30-year loan than those with worse credit scores and those who purchased a home just a week before these FHFA rules went into effect.
For those of us who jumped through every hoop imaginable—in this insane market—to purchase our homes while maintaining stellar credit, it is an infuriating turn of events.
Setting aside the obvious unfairness of it all, no one in the Biden Administration appears able to see the dangers of the government encouraging lenders to make what are obviously risky loans in this current economic environment.
It is yet another cynical attempt by the increasingly desperate Biden Administration to effectively purchase the votes of Americans in the run-up to what will be a highly contentious presidential election cycle. Biden is bleeding approval ratings and things for America under his watch are going badly.
Between moves like the lowering of lending standards to make it possible for more people who would otherwise not qualify for purchasing a home, and moves like Biden’s student loan forgiveness plan, President Biden is going to any lengths to keep his tenuous grip on power.
The FHFA is spreading their typical bureaucratic malarkey to try to allay the apparent bad press they’ve been receiving since the news of these changes broke several weeks ago. FHFA Director Sandra Thompson insists that the proposed changes will only affect those people bringing smaller down payments to the table. Those purchasers bringing large sums of money upfront or high credit scores will see their fees remain flat or decrease.
The Gerontocracy Strikes Again
Yet, what Director Thompson conveniently leaves out of her shambolic assessment of the changes is that 26 percent of all home purchases in the United States last year were by first-time home purchasers who, by definition, put the least amount of money down that they can.
That figure, by the way, was down from 34 percent the year before. And, that 34 percent is far lower than where it was in 2010 (50 percent) which is considered the peak year for the First-Time Homebuyer Tax Credit.
Young people—families that are just starting out—are the ones hardest hit. President Joe Biden, the oldest president in history, is yet again serving his fellow gerontocrats by ensuring that only they can purchase homes easily. After all, it is the wealthier, older set in America who can afford to bring large sums of money to the table as a down payment. But the elderly in this country have been given enough. Biden’s policies are designed to punish the hardworking Millennials who are desperately trying to find stable footing in this awful Democrat-led economy.
At some point, the American people (notably my fellow Millennials), must wake up and see how the gerontocracy has made America worse off. We need to stop falling for the old debates that defined the Boomer generation and divided Republican and Democrat and start voting for what’s in our generational interests.
The FHFA rules are not only going to squelch whatever part of the new generation is productive, but it could also help to bring about another subprime mortgage crisis a lá 2008.