Source: United States Senator Kevin Cramer (R-ND)
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WASHINGTON – U.S. Senator Kevin Cramer (R-ND), member of the Senate Banking Committee, joined Steve Lance on NTD News’ Capitol Report to discuss the Federal Housing Finance Agency (FHFA) policy penalizing Americans who responsibly manage their money. The rule, made effective May 1, hikes upfront fees for individuals with credit scores above 680 to subsidize high-risk borrowers. Excerpts and full video are below.
On the Rule:
“It takes people who have a lower credit score and gives them beneficial financial treatment for loans, but pays for it by taking money from people who have a higher credit score. So, if you have a credit score of 679 or lower, you get beneficial terms. If you have a credit score of 680-780 and have a 15-20% down payment on your mortgage, you’re going to get extra fees attached to that – to the tune of about $30,000 over the life of the loan – to subsidize the people with the lower credit rating. It is the most perverse incentive I’ve seen since forgiving student loan debt.”
On Recent History, Economic Context:
“We had a similar situation [in 2008] that collapsed the entire economy because we had incentives for people to borrow money who shouldn’t probably be borrowing money. That has to be paid for somewhere else – that’s being paid for, in this case, by people with good credit. That creates an obvious inefficiency in the lending process. All of that at a time when we’re on the verge, perhaps, of a banking crisis – let’s hope that doesn’t happen. We need to do more things to prevent that. We’re already in an economic crisis. We’re on the verge of a recession while we’re experiencing inflation. Interest rates have gone up 10 times in a row. So, everything’s wrong, and then they throw this on top of it, which is further wrong.”
On Consequences for High Credit Earners:
“The very thing [the administration] could collapse is the dream of home ownership.”
“On its face, [the policy’s] already got negative consequences because it disincentivizes people to have a good credit rating. Credit ratings are not necessarily attached to how much money you have. [My parents] were middle class, lower-middle class, worked hard, had good credit ratings because they didn’t borrow a lot of money… they paid their debts on time, they didn’t take on credit card debt, so, they’d have a good credit rating. They would literally, in this scenario, be paying or subsidizing people who make two, three, four times as much money.”
Background:
Senator Cramer sent a letter to FHFA Director Sandra Thompson urging her to reverse the rule. He also voiced his opposition to the policy at a Banking Committee hearing last month.