BATON ROUGE – State Treasurer John M. Schroder lambasts a new policy that will increase home-buying costs for those with good credit ratings in a letter to President Joe Biden and Federal Housing Finance Agency (FHFA) Director Sandra Thompson. Co-signed by 33 state treasurers and financial officers, the letter points to the measure which will punish those who have worked, saved and paid their bills on time.
“This is the most absurd thing I’ve seen in a long time,” said Schroder. “It flies in the face of the American Dream where if you work hard, you can achieve anything. In this case, if you do those things, your dream of home ownership will just cost you more.”
The letter states that with the new FHFA policy that went into effect May 1, those who make down payments of 20 percent or more on their homes will pay the highest fees, calling it “one of the most backward incentives imaginable.”
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Additionally, it has been estimated that borrowers with an approximate 680 credit score will pay around $40 more per month on a $400,000 mortgage due to the new policy that went into effect May 1 for the Federal Housing Finance Agency. The increase in private mortgage insurance (PMI) is intended to help subsidize people with lower credit ratings also looking for a mortgage, according to a Washington Times report last week.
PMI fees are required by the Federal Housing Administration (FHA). They have historically been lower for those with good credit and higher for those with lower credit scores, which makes their loans riskier. The intent is to help level the playing field from a risk perspective.
The new policy does the opposite.
“It amounts to a middle-class tax hike that will unfairly cost American families millions upon millions of dollars,” reads the letter.
With a business background in real estate development, Schroder can also attest to the current fragility of the real estate market with a dearth of properties and pricing imbalance compared to the market just two years ago.
According to the National Association of Realtors, March 2023 saw 4.4 million housing transactions, which is down 22 percent from the 6 million sold in previous years.
“We’re already in a housing slump. As a realtor, of course, I want everyone to be able to afford home ownership,” said Schroder. “But subsidizing risk by taxing the middle class is not how you do it.”
