Photo from Pennsylvania Treasurer Stacy Garrity’s Facebook page Pennsylvania Treasurer Stacy Garrity speaking at a committee hearing in Harrisburg on Feb. 1, 2023. Garrity leads a coalition of 26 states urging the Biden administration to repeal new mortgage fees levied against borrowers with higher credit scores and bigger down payments.

Pennsylvania Treasurer Stacy Garrity leads a coalition of state financial officials pushing back against new federal mortgage fees they call “unconscionable.”

“This new policy makes it more expensive for people with good credit to buy houses – and that’s absurd,” she said. “Americans who have built a good credit score and saved enough to make a strong down payment should not be penalized and forced to pay more on their mortgage every single month.”

The letter, sent Monday to President Joe Biden and Federal Housing Finance Agency Director Sandra L. Thompson, includes the signatures of 33 officials from 26 states – all of whom insist the administration should roll back the modified fee structure that applies to borrowers with more favorable credit profiles.

The new rates, which went into effect Monday, raise upfront fees for borrowers with credit scores over 680 and down payments between 15% and 20%. The extra money collected subsidizes buyers with less favorable finances – part of the administration’s strategy to make homeownership more accessible for borrowers with less wealth and upward mobility.

Only mortgages backed by Freddie Mac and Fannie Mae – which included more than half of home loans taken out in 2020 – will see the fee increase.

Garrity and other critics said the backward incentive boils down to a middle-class tax hike that takes “money away from the people who played by the rules and did things right.”

In multiple media reports, housing analysts say borrowers with better financial profiles still get lower interest rates and pay less overall compared to buyers with less favorable loan terms. The higher interest rates, smaller down payments, and added cost of mortgage insurance typically eclipse any savings on up front fees in a matter of years.

In the letter, the officials shared in the administration’s goal of increasing home ownership, but said “confiscating” the money from “hardworking, middle-class American families” and using it as a “handout” goes too far.

Instead, they want to see the federal government adopt policies to reduce inflation, cut energy costs and lower interest rates – all factors that would boost discretionary income and give people more leeway to save for a down payment.