State Leaders: Upside-Down Policy ‘Amounts to a Middle-Class Tax Hike’

CHARLESTON, W.Va. – State Treasurer Riley Moore today announced he has joined a coalition of leaders from 27 states to oppose a new Biden Administration housing policy that will subsidize mortgages for higher-risk borrowers by charging greater fees on individuals with better credit.

“This disastrous policy injects socialist principles into our banking sector and punishes middle-class Americans who work hard to build good credit and buy a home,” Treasurer Moore said. “If people work hard to achieve the American dream of home ownership, they should not be punished with higher fees to subsidize those who pose a greater financial risk.”

Treasurer Moore joined a coalition of 34 Treasurers and State Financial Officers from 27 states to send a letter to the Biden Administration to oppose its new Federal Housing Finance Agency policy that became effective May 1.

“For decades, Americans have been told that they will be rewarded for saving their money and building a good credit score,” the letter said. “This policy turns that time-tested principle upside down.”

The new policy will change how the FHFA assesses its loan-level price adjustment (LLPA) fee on new mortgages. LLPA fees were introduced in response to the 2008 financial crisis and are risk-based fees charged on borrowers using conventional mortgages.

In January, the FHFA announced changes to how these fees will be calculated, reducing the costs for higher-risk borrowers while increasing the fees on those with better credit. The agency said the move was designed with the goal of “facilitating equitable and sustainable access to homeownership.”​

Treasurer Moore and the coalition argue this change undermines the purpose of these fees, introduces greater risk to the mortgage lending process, and penalizes Americans who have worked hard to improve their credit. They said increasing home affordability can be accomplished in other ways than manipulating how the financial system assesses lending risk.

“We all want to increase home ownership across our great country – that’s a central component of the American Dream,” the letter said. “But the right way to solve that problem is not to use the power of the federal government to penalize hardworking, middle-class American families by confiscating their money and using it as a handout. The right way is to implement policies which will reduce inflation, cut energy costs and bring lower interest rates.”

Treasurer Moore said this policy represents the latest effort by woke activists to undermine the banking system to promote environmental, social and governance (ESG) initiatives over sound financial policies.

“We have already seen several high-profile bank failures this year due to banks improperly managing risks, and this new policy will only inject more risk into the system,” Treasurer Moore said. “We need to fight back to stop this administration from using our banking system to implement their radical social agenda.”