America's Talking - Biden Administration’s Controversial Rule Raising Fees for Those With Good Credit Goes Into Effect

Episode Date: May 5, 2023

The latest in a series of new Biden administration rule changes that charge higher fees to certain home buyers with good credit and lower fees for buyers with worse credit went into effect this week despite pushback from Republicans and many financial experts. Support this podcast: https://podcasters.spotify.com/pod/show/america-in-focus/support Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hello, and welcome to America in Focus, powered by the Center Square. I'm Dan McAulb, executive editor of the Center Square Newswire Service. Joining me today is Casey Harper. The Center Square is Washington, D.C. Bureau Chief. We are recording this on Thursday, May 4th, a day early this week because you are about to embark on one of your infamous month-long vacations, Casey Moore. Are you ready? Also known as seven business days, but yes, you know, heading out of country, it's going to be a lot of fun. And you're bringing your newborn child, Enoch, with you. I am. He's going to do great. As I told you earlier, I feel sorry for the fellow passengers who are immediately behind you in front of you and next to you.

But best of luck, hopefully Enoch makes it through it without too much crabbiness. Yeah, I'll report back on that. Actually, let's report on this new housing loan rule that went into effect today. As many Americans up in arms, tell us what the Biden administration did this time. Yeah, I mean, so you might be tempted to have. have your eyes glazed over when you hear housing, mortgage, rules, fees, lending. It can be pretty technical, almost, you know, could come across us boring. But it's actually been one of the stories that sparked the most controversy in recent weeks for the Biden administration.

And I'll try to, you know, succinctly explain why. Essentially, the FHFA, which oversees Fannie Mae and Freddie Mac, and help set interest rates for borrowers who, you know, for borrowers in large part in the U.S. economy, they have recently, in the last few months, been changing their fee policy. And the long and the short of it is they have increased fees for borrowers with really good credit. And they have decreased fees for those with poor credit and who fit. There's certain other criteria, but basically to summarize it, easy. it's with poorer credit, right? And so this has, let me, let me interrupt a second. I thought banks

assess the risks of loans and assigned interest rates based on those risks. The lower the risk, those who pay their bills and have a history of paying their bills pay a lower interest rate, those who haven't been paying their bills or have poor credit, they pay higher interest rates because the banks have to, the banks have the risk there. So what's, why? Why? Dan, Dan, Dan. It's so, so sweet that you think all this political stuff is driven by math and common sense, you know.

Since what does math have to do with loans and banking? Okay. This is the new way forward. And there's one key word that was maybe I think the FHA regret saying and it's equitable. And I think they really revealed their hand on this and maybe you tried to back backtrack a little bit. I can't get past you calling me sweet, Casey. I'm sorry. Tell me about how equity plays into this. Yeah. So this is really a play to be more equitable at how housing loans are distributed, right?

And more they call it more sustainable. These are kind of buzzwords for things that we're used to talking about on this podcast. And our listeners are probably used to seeing in the news. So this isn't based on math or anything. It's based on equity. Now, you know, I had a lot of back and forth with, one of the, I guess, bureaucrats at FHFA. And, you know, he pushes back on this. He says there's not a big connection between these two fee changes. He says it's not accurate to say that agency is charging those with good credit to subsidize those with bad credit. Of course, those critical of the policies say the exact opposite. There's a lot of, you know, Senate Republicans. Even, you know, this isn't just purely right versus left. There's someone on the left. You're upset about this too, who say this is, you know, just, you know, a Robin Hood kind of thing.

And they also say it's not fair to those poor people who have really good credit. There's plenty of lower class economically Americans or lower middle class Americans who have good credit. So having bad credit and being poor are not synonymous, right? So those poor Americans with better credit could be penalized as well. So it is a very technical thing, but it's driven by one of the works that keeps coming up, no matter what we talk about, whether it's education, whether it's, it's government spending, whether it's health research, whether now it's banking loans. Equity seems to work its way into the story.

Well, Casey, I know you're still relatively a young lad. I'm a more experienced fellow here. I remember back in 2008 and 2009, the financial crisis of that area that was caused in large part when the housing bubble burst more than a decade of policies. that started under President Bill Clinton, if I remember correctly, that opened up the mortgage program to more Americans, so more Americans, including lower income Americans, can get into housing. Well, that built up over time to the point where in 2008 that housing bubble burst leading to the financial crisis. Are there concerns about this with this new rule? Right. I mean, that's exactly. What you laid out is exactly the concern. You know, if it weren't

for 2008, this kind of fee change, as subtle as it is, may have gone unnoticed or definitely without this controversy, but people, you know, people born during, you know, the Grover-Cleveland administration like yourself, Dan, remember the 2008 crisis. And they, I'm just on a roll today. That was funny. That sounds good. Wow. Right, yeah. They remember the 2008 financial crisis. And it's not just, you know, a lot of people, I think, still don't really understand. It's pretty complicated, how it all went down. But one thing that people do remember is that they were trying to give homes. The federal government was putting on

pressure to give homes to people that could not afford it. That's like one big takeaway that is a common theme that is going from then until now. You can have good motives for wanting to give people homes, but it sure sounds a lot like 2008 when we kind of tried that and almost basically crashed the economy. Well, thank you, Casey. It is a complicated topic, but there's going to be plenty to come off of this. I'm sure those in the financial sector, Republicans also are going to continue to push back on this, trying to get this rule changed. But you can read more about this story going forward at the center square.com. That is all the time we have, though. For Casey Harper, I am Dan McAilip. Thank you for listening.