Op-ed by Treasurer Stacy Garrity - Since May 1, many hardworking middle-class Americans have been paying more to buy a home because of an outrageous new rule imposed by the Federal Housing Finance Agency (FHFA). Instead of rewarding families who play by the rules, the FHFA is now penalizing them with higher mortgage fees. It’s completely backwards.
In fact, let’s call it what it is: The FHFA policy is a tax hike that will cost American families millions of dollars.
To end these unconscionable fees, the U.S. House passed the Middle Class Borrower Protection Act, H.R.3564, with a bipartisan vote on June 23. I applaud their efforts, and I urge the Senate to follow suit immediately.
Undoing this terrible policy will ensure fairer borrowing practices for future home buyers who receive loans from Fannie Mae and Freddie Mac. According to Bloomberg, roughly half of U.S. mortgages involve these two entities.
The new FHFA policy hiked fees for responsible buyers who have saved enough for a down payment of 20 percent or more and earned a good credit score. This makes no sense – there’s absolutely no reason hardworking Americans who have done everything right should be penalized with more expensive mortgages.
In May, I led a coalition of more than 30 fiscal officers from 26 other states calling for this policy to be scrapped. The fact that the effort to end it passed with bipartisan support is not a surprise – I’ve heard from many people, Republicans and Democrats alike, who strongly disagree with this attack on the middle class.
Home buyers are already facing skyrocketing interest rates and the continuing impact that inflation is having on groceries and other essentials. Making mortgages more expensive is like tossing an anchor to someone who’s drowning. Americans need a lifeline, not something else to weigh them down.
One estimate shows that under this new policy, a family buying a $400,000 home – which is less than the median cost of a home in the U.S. – would pay approximately $40 more per month on their mortgage.
$40 a month may not sound like much, but over the course of a 30-year mortgage, that’s $14,000! That money would be much better spent on home repairs, saving for a child’s education, buying a new vehicle – or any of the other financial needs that families face every day.
The stated goal of these new fees is to help higher-risk borrowers better afford homes. I support efforts to increase home ownership and believe that it’s a central part of the American Dream. But there are better ways to help families succeed.
Many federal, state and local programs are already in place to help Americans afford housing, especially first-time homebuyers. Instead of confiscating more money from middle-class families, we should prioritize policies that combat inflation, cut energy costs and lower interest rates.
By voting to reverse this misguided FHFA policy, the U.S. Senate will send a strong message that it supports families who work hard and save money.
The Senate should approve H.R.3564 now, and President Biden should sign the bill when it reaches his desk.
This op-ed was originally published by Broad + Liberty on July 10, 2023.