The Biden administration has pushed for easier home financing for higher-risk borrowers amid surging housing costs, increasing the risk of a wave of defaults, experts told the Daily Caller News Foundation.
The government-sponsored corporations Freddie Mac and Fannie Mae, regulated by the Federal Home Financing Administration (FHFA), have taken a number of steps to increase financing opportunities for higher-risk borrowers under the Biden administration, including subsidizing higher-risk borrowing by hiking rates on lower-risk borrowers. Many of these actions have led to Americans taking on an increasingly large amount of debt while lending facilitated by government entities has grown in size, creating a growing possibility that a wave of foreclosures and defaults could create a shock in the housing system, according to experts who spoke to the DCNF.
âThe new Fannie and Freddie mortgage pricing directive raised rates on low-risk borrowers and reduced them on high-risk borrowers,â Jason Sorens, senior research fellow at the American Institute of Economic Research, told the DCNF. âThis is not really a free market to begin with, but the risk here is creating something like the subprime crisis, where high-risk borrowers are encouraged to take on debt they canât repay. Again, this has the potential to hit the bottom line for Fannie and Freddie.â
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