On May 1, new Federal Housing Finance Agency (FHFA) rules went into effect that will allow borrowers with lower credit ratings to qualify for better mortgage rates than they otherwise would have. Meanwhile, borrowers with better credit ratings will pay higher fees to subsidize the program. Peter Schiff recently appeared on Real America with Dan Ball to talk about the new rules.
Experts say a person with a credit score over 680 could pay an extra $40 to $70 per month.
When the news came out, Peter Schiff tweeted, “Just when you thought the Joe Biden administration couldn’t get any dumber, it does this. It’s a perfect example of why government shouldn’t have any involvement in the housing market and why the FHA, Fannie Mae and Freddie Mack should all be abolished.”
Dan said he’s about ready to buy a home and he’ll be punished if this plan goes through. Peter told Dan he didn’t have to get punished.
Just miss a few payments. Screw up your credit score. That will help your mortgage rate.”
Peter also noted that the plan will encourage homebuyers to make smaller down payments.
Normally, if you make a big downpayment, you get a better rate. But now, Biden wants the better rates to go to people that don’t make a big down payment. The worst part about this is that it’s going to further undermine the solvency of our banking system because banks are going to be encouraged and actually required to make more loans to riskier borrowers, which means more mortgages are going to end up in default.”
As Dan pointed out, this isn’t unlike the policies that helped blow up the subprime mortgage bubble leading up to the 2008 financial crisis.
During the Clinton and GW Bush administration, the government was pressuring banks to make loans to marginalized communities. But as Peter pointed out, banks are supposed to be colorblind.
They’re making loans based on the ability to repay. If somebody can repay the mortgage, they’re going to make it. So, if they’re denying mortgages, it’s not because they’re racist or sexist or homophobic or whatever. They’re denying the mortgage because the borrower probably can’t pay the money back.”
Peter said programs like this are really doing a disservice.
When the government encourages people who can’t afford houses to buy them anyway, they actually end up in over their heads, and they lose money because houses are very expensive. Take it from me; I own several. And you know, they’re money pits. You need money to afford to own a home. You can’t own a home when you’re broke.”
Looking at the broader Biden economy, Peter called it “a disaster” and said you can fit all of Biden’s economic accomplishments “on a chewing gum wrapper.”
In fact, you probably don’t even need all that paper, because I don’t even think he has any accomplishments to list. He’s just stumbled his way through the first couple of years in the White House and the economy is getting worse. Inflation is getting worse. All he’s done is worsen the problems that he inherited — not like everything was great when he stepped into office. But he’s made it worse.”
As just one example, Peter mentioned the surging deficits. The Biden administration ran a budget deficit of over $1 trillion in just the first six months of fiscal 2023. Meanwhile, the US continues to run a massive trade deficit.
Peter said Biden’s policies have complicated the Fed’s efforts to fight inflation. (Not that the Fed is doing a great job.)
It’s impossible to fight inflation when the Biden administration continues to create it by running massive deficits.”