The fake republican outrage at a “Biden housing rule”
No, this 90s-era rule isn’t punishing high credit scores, nor will you see more fees: debunking the made-up scandal behind a 1990s mortgage practice
Republican tabloids and blogs are recirculating a wholly made up scandal. In this scandal, republicans blame Biden for a 1990’s practice for reducing mortgage risk. “Biden rule will redistribute high-risk loan costs” the headlines cry. Other conservative media picked this up and use circular citing as evidence.
The reality is far more boring.
In the 1990s, Fannie Mae and Freddie Mac introduced loan-level price adjustments (LLPAs) where higher risk lenders would pay more for their loan. This allows lenders to manage their risk, and prevent good credit borrowers from being punished for the risk exposure.
In May 2023, these numbers will adjust, which is the basis for this republican scandal.
Most notably, this doesn’t affect most FHA, VA, or USDA loans. Entities that will pay more are high risk entities, as well as large entities that are sweeping up all of the housing inventory. Specific groups that will pay more are: ARM loans, second homes, multi-unit properties, extreme-high balanced fixed rates and ARMs, and debt-to-income ratios of over 40%.
The fee paid by high-risk debtors (around $1%) means that low-risk borrowers have less exposure to the consequences of high-risk borrowers. Not only are these numbers boring, but the practice makes sense. Yet, this is causing angry readers to fume at Biden. Which, of course, is the point of the republican outrage machine.
The Washington Post performed an investigative deep-dive into the incredible ability for republicans to both create, and consume non-scandals. “They have shown they have plenty capacity to invent scandals out of thin air….And there is no shortage of Republicans who can perform on cue. “
This is the perfect example. Not only has this program been around since the 90s, but these are not rules nor regulations mandated by a government agency or governing body. Rather, they are a pricing mechanism used by lenders to manage their risk.
With 25% of Americans registered as republican, an overwhelming negative public sentiment towards republicans, and no popular ideas, republicans now rely on outrage politics. This made up scandal is no different.
