CFE Leads Coalition Warning on Risky Mortgage Credit Changes

The Center for a Free Economy is leading a coalition of 35 free-market and taxpayer-focused advocacy groups urging federal housing regulators to slow down proposed changes to mortgage credit standards that could destabilize the housing market.

In a coalition letter organized and led by CFE, the groups warned Federal Housing Finance Agency Director Bill Pulte that altering how credit scores are used in mortgage underwriting risks repeating the policy errors that contributed to the 2008 financial crisis.

The message is direct. Efforts to expand access to credit must not come at the

expense of sound underwriting or taxpayer protection.

What the FHFA Is Considering

The FHFA is weighing changes to the credit score framework used by Fannie Mae and Freddie Mac, the government-backed enterprises that sit at the core of the U.S. housing finance system.

Credit scores remain one of the most reliable tools for assessing repayment risk. Weakening their role or replacing them with less transparent measures does not reduce risk. It shifts that risk onto lenders, investors, and ultimately taxpayers.

CFE’s coalition letter cautions that policy-driven changes to underwriting standards can create incentives for approving loans that would not meet basic market tests.

Why the 2008 Experience Still Matters

The coalition’s warning is rooted in recent history. In the years leading up to the 2008 housing collapse, federal policy repeatedly encouraged looser lending standards in pursuit of broader homeownership.

Those incentives distorted risk pricing, encouraged excessive leverage, and left taxpayers responsible for massive bailouts when the system failed. Millions of families lost their homes, and confidence in the housing finance system was severely damaged.

CFE’s coalition argues that any proposal echoing those incentives must be approached with caution.

Market Signals Should Guide Lending

CFE and its partners are not opposing innovation or better data. They are opposing mandates that override market discipline.

When government agencies dictate how risk must be measured, lenders face weaker incentives to price loans responsibly. Borrowers receive misleading signals about affordability. And taxpayers are left exposed when assumptions prove wrong.

Housing affordability is a serious challenge. But lowering underwriting standards is not a solution. It is a policy shortcut that trades long-term stability for short-term optics.

CFE Takeaway

The Center for a Free Economy led this coalition effort to reinforce a simple principle. Sustainable homeownership depends on honest risk assessment and strong underwriting standards.

Federal housing regulators should proceed carefully, respect market signals, and avoid policy changes that could once again leave taxpayers holding the bag.