Five states have passed laws that make it more difficult for lenders to foreclose. The new laws are complex. So Fannie and Freddie have to spend more money to research a property offered for sale. They plan to pass on these extra costs to people who get a mortgage from these two government entities. This seems reasonable. The customer is sovereign. If he gets the benefit of a government-subsidized loan, why shouldn’t he pay for the privilege? Why should taxpayers in the rest of the states take the loss?
But Congress is protesting. The borrowers should not pay more, just because they live in states that have passed these laws in order to reduce sales? The states are New York, New Jersey, Connecticut, Illinois, and Florida (New York South).
The goal of the states’ politicians as to make foreclosures more difficult, and therefore more expensive. They have achieved their goal. But they have penalized buyers and sellers of homes that have not been foreclosed. This is an unintended consequence of legislation designed to interfere with the performance of contracts.
The politicians cannot let good enough alone. They want too help “the little guy”who is about to lose the home he cannot pay for. He made a mistake. Politicians want to confirm his bad decision retroactively. So, they pass laws that make life more difficult for solvent people. The new laws make life harder for other little guys — the ones who did not make a mistake by taking on so much mortgage debt that they no longer make payments.
This is cause and effect in government intervention into free markets. The results are the opposite of the stated intentions. The politicians passed laws to help the little guy. Far more little guys are harmed.