President Biden just made a major change to the mortgage system that could have devastating consequences for homeowners and the economy as a whole.
On Monday, Biden announced that he was directing the Federal Housing Finance Agency (FHFA) to eliminate medical debt as a factor when underwriting federally guaranteed mortgages. This means that borrowers with medical debt will now be able to qualify for mortgages even if they have a history of missed payments or defaults.
On the surface, this may seem like a good thing. After all, medical debt is one of the leading causes of bankruptcy in the United States. And it’s true that eliminating medical debt from the mortgage underwriting process could help some borrowers get the loans they need to buy a home.
However, there are a number of reasons why this is a bad idea.
First, it will make it easier for people with poor credit histories to qualify for mortgages. This could lead to an increase in subprime lending, which was a major factor in the financial crisis of 2008.
Second, it will make it more expensive for everyone to buy a home. When lenders have to lend money to borrowers with higher risk profiles, they have to charge higher interest rates. This means that everyone will have to pay more for their mortgages.
Third, it will encourage people to take on more debt than they can afford. When people know that they can get a mortgage even if they have a lot of debt, they may be more likely to take out a loan that they can’t actually afford. This could lead to a wave of foreclosures, which would hurt the economy.
In short, Biden’s decision to eliminate medical debt from the mortgage underwriting process is a bad idea. It will make it easier for people with poor credit histories to qualify for mortgages, which will make it more expensive for everyone to buy a home and encourage people to take on more debt than they can afford. This could lead to a financial crisis, which would hurt the economy.
Congress should take action to reverse this decision before it’s too late.
"REDISTRIBUTION OR YOU COULD CALL IT SOCIALISM" – @MariaBartiromo
Mortgage fee rules quietly get overhauled, resulting in discounted rates for riskier-credit homebuyers & forcing higher-credit homebuyers to foot the bill…@BillHemmer @DanaPerino pic.twitter.com/VolYIQjXUU
— America's Newsroom (@AmericaNewsroom) April 20, 2023
WATCH: Biden rule will redistribute high-risk loan costs to homeowners with good credit.
David Stevens, former Federal Housing Administration Commissioner, joins. pic.twitter.com/cZPsrrfHzR
— America Reports (@AmericaRpts) April 20, 2023