(Glenn Minnis, The Center Square) Members of the Georgia Freedom Caucus are urging state Treasurer Steve McCoy to join other Republican state financial officers in formally opposing the Biden administration’s new policy making homeowners with good credit pay more on their mortgages while reducing costs for those with poor credit.
In a letter to McCoy from Georgia state Rep. Charlice Byrd and Sen. Colton Moore, chairman and vice-chairman of the Georgia Freedom Caucus, respectively, the lawmakers say the new policy will punish Georgians who have been financially responsible by paying their bills on time.
“This policy is unfair to the hundreds of thousands of Georgians who have diligently managed their finances in anticipation of buying homes, only to be required to pay a ‘good credit’ penalty to subsidize riskier borrowers,” Byrd and Moore wrote. “It is a significant imposition on Georgians at a time when inflation, rising interest rates, and uncertain economic prospects due to federal mismanagement of the economy have already slowed the sales of homes in Georgia over the past year. Furthermore, this FHFA policy was done without a formal rulemaking process that should have given state financial officers like you an opportunity to explain to the agencies the harm this policy will cause.”
Nearly three dozen treasurers from other states already have gone on the record opposing the policy, as have state-based Freedom Caucuses from across the country.
“To penalize achievement is not the American way,” Illinois state Rep. Chris Miller told The Center Square. “In building good credit for themselves, people are doing the right thing. We live in a free market society and this would definitely not be anything that follows those tenements. It’s important to take a stand for those who are doing the right thing.”
As a member of the Illinois Freedom Caucus, Miller recently joined 11 other state legislators in sending a letter to the Biden administration calling on the White House to rescind the new rule making home loans more expensive for those with the best credit. Addressed to Federal Housing Finance Agency (FHFA) Director Sandra L. Thompson, the letter is a follow-up to one sent to Thompson earlier this month by 34 state financial officers.
The rules work by increasing Loan-Level Price Adjustment fees for mortgage borrowers with higher credit scores and decrease those same fees for individuals with lower scores. The loan-level price adjustment is a fee attached after bankers access the risk associated with a deal, with the change potentially costing the would-be borrowers with better scores more.
Miller said he suspects that may not be the only motivation supporters of the legislation share.
“For Democrats, I would suspect part of it also has to do with being able to have another government handout and trying to find votes for themselves,” he said. “It’s not because they care about anyone, or are concerned about anyone other than themselves. Democrats are motivated by staying in power and anything that drives that narrative is something they’re ready to act on.”
While supporters of the proposal contend fee policies are often updated and in the end those with worse credit will still pay more than those with better credit, the Freedom Caucus letter outlines “this shortsighted and counterproductive policy demonstrates a profound misunderstanding of the necessity of accurately tailoring housing finance products to credit risk and establishes a perverse incentive that punishes hardworking Americans for their fiscal prudence.”
Byrd and Moore now want Georgia’s treasurer to join the opposition.
“We ask again that you join your colleagues in leading the effort for our citizens against this policy and we will enthusiastically support and promote your efforts to do so,” they wrote McCoy.
In further criticizing the plan, opponents point to the way pushing home loans to Americans with poor credit histories was a key factor in the financial crisis that rocked the country back in 2008.
“The fact that a proposal flaunting credit risk is being openly pushed by FHFA just a decade-and-a-half after the housing-led 2008 financial crisis is staggering,” the Freedom Caucus letter added.