Last month, former President Joe Biden made headlines lamenting that his legacy and accomplishments are rapidly being undone by the Trump Administration. On that point, there is no doubt Mr. Biden’s mental acuity is sharp as a tack.
In just six months, President Trump has made much of Mr. Biden’s four-year tenure appear as a mere blip in the rearview mirror. A few notable examples: border crossings are nearly non-existent, lower tax rates have become permanent, the federal workforce and agencies themselves are being slashed, federal lands are opening for energy exploration, and green energy subsidies have been left to die on the vine.
There is one curious exception, however, where the Biden agenda has not only survived, but is being given new life. For some reason many cannot fathom, the director of the Federal Housing Finance Agency (FHFA), Bill Pulte, continues to promote the cornerstone of the Biden Administration’s housing policy: a two-score system for credit reports to obtain government-backed mortgages.
Ignoring the lessons of the 2008 economic meltdown, brought on by a crisis in the housing lending market, the Biden Administration advanced a policy that would introduce uncertainty and instability to mortgage lending. The purpose of the policy was to extend credit to borrowers who otherwise would not qualify for a home mortgage. That should sound very familiar to Americans who remember 2008.
As the Wall Street Journal recently noted, “The Biden Administration took steps to enable less credit-worthy borrowers to qualify for mortgages to support the housing market. Now the Trump team is doing the same in the name of boosting home ownership and lowering costs for borrowers. Taxpayers, look out.”
That the Biden Administration pursued reckless economic policies comes as no surprise. That the Trump Administration would actually embrace one of these policies is astonishing.
America painstakingly clawed its way out of what became known as the “Great Recession” by reinstituting stability and certainty to the lending market. In mortgage lending, the single score, tri-merge FICO score has long been the bedrock of assessing risk for lenders. When government policies encouraged lenders to ignore this risk, the whole nation paid the price.
To date, there is no evidence that any other credit scoring model is more accurate or predictive than the current single-score option. Adding an unproven, untested score for lenders to consider undermines FHFA’s mandate to, above all else, ensure stability, security, and liquidity in mortgage lending.
Not only has FHFA Director Pulte endorsed this Biden policy, he has also been trumpeting it on social media, portraying it as fulfilling a promise made by candidate Trump during last year’s campaign. Unsurprisingly, Pulte never cites even a single instance where Trump himself ever embraced this folly.
Pulte is, of course, the multi-millionaire scion of the PulteGroup, an immensely successful home construction conglomerate founded by his grandfather. Still, he has no experience in housing policy, and what he lacks in evidentiary support for his claims he compensates with enthusiasm and social media bravado. In one instance he claims his policy will lower costs but fails to explain how. Pulling a credit report is by far the least expensive of all the components required for a home purchase, representing less than 0.2% of the average closing cost. Neither can Pulte explain how millions of additional people suddenly eligible for a mortgage through a more permissive scoring model lowers home prices.
Pulte claims “my ORDER today will allow for Americans to use their RENT to qualify for a mortgage,” a cringeworthy statement given rent payments have been included in FICO scores since 2014. The challenge has been getting landlords to report that history, a shortcoming for which Pulte offers no solution.
For the second time, Americans have given the keys to the White House to a developer, and not a moment too soon given Biden presided over the worst housing market in 40 years. One wonders if Mr. Pulte is up to the job. While Mr. Trump aims to make America great again, his FHFA director seems intent on making America 2008 again. President Trump needs to set Pulte straight or find someone else for the job who doesn’t hold nostalgia for Joe Biden’s housing agenda.
Gerard Scicema is the chairman of Consumer Action for a Strong Economy.
