A new Biden administration rule that will have homebuyers with good credit pay more to subsidize riskier borrowers may have a disproportionate impact on one minority group — Asian Americans, who are already facing increased hurdles to borrowing for a home.

Effective May 1, new regulations from the Federal Housing Finance Agency will result in borrowers with lower credit scores who have less money for down payments qualifying for more favorable mortgage rates than they would have otherwise, while individuals with higher credit scores will be penalized with higher fees, Fox News reports.

However, the implementation of these new regulations may unfairly impact Asian American homebuyers, as they tend to have higher credit scores than any other racial group. Investopedia’s report indicates that, with an average credit score of 745, Asian Americans are the only demographic group classified as “very good” under commonly used FICO standards.

On average, Asian Americans possess a credit score of 745, which is 11 points higher than the average credit score of white Americans at 734. Additionally, Asian American credit scores surpass those of Hispanic and black Americans, who average credit scores of 701 and 677, respectively, Fox News noted further.

Credit score is a critical factor in determining an individual’s creditworthiness, which is essential for lenders to assess if a potential borrower qualifies for a loan and at what interest rate.

“But those with higher scores could effectively be punished for their creditworthiness under the new rules, with experts estimating that borrowers with a score above 680 could expect to pay an extra $40 per month on a $400,000 mortgage,” Fox News reported.

According to Richard Stern, the director of the Grover M. Hermann Center for the Federal Budget at The Heritage Foundation, the new regulations will have a similar effect to a tax hike on well-qualified homebuyers.

“It is mechanically a tax increase to cover an increase in welfare. There’s no other way to spin it,” Stern said. “A government-sponsored entity is saying that if you have good credit, we’re going to have you pay more. And we’re going to use that to have other people pay less who have less money and a lower credit score.”

The situation could be even more challenging for Asian Americans, who have encountered obstacles to owning homes despite possessing higher average credit scores. The Urban Institute’s 2021 report revealed that Asian Americans have a lower homeownership rate of 57 percent, in contrast to white Americans who have a rate of 72 percent.

“We found that the denial rate for Asian mortgage applicants is 8.7%, compared with 6.7% for White mortgage applicants,” the authors of the study wrote.

While various elements like income, debt-to-income ratio, and geographical location influence loan approval, the Home Mortgage Disclosure Act (HMDA) data analysis demonstrates that Asian Americans confront higher mortgage rejection rates across all lending underwriting standards.

“Asian applicants are denied more frequently than White applicants at all income levels,” the study says. “In 2019, median income was $107,000 for Asian applicants and $82,000 for white applicants. For Asian applicants with annual incomes below $50,000, 16.3% were denied a mortgage, compared with 11.3% of White applicants in that income bracket.”

“In metropolitan areas with large numbers of Asian mortgage applicants, we found that the denial gap persists and holds regardless of home price tier,” the authors wrote.

Stern said the reason for it should be laid at the feet of left-wing Democrats.

“The reason we’re having less inclusion, fewer people (making) it up the social ladder, is because the left has controlled the government for the last few decades, increasing regulations, increasing taxes, increasing the size of the government and destroying the free market enterprise system that has lifted so many people out of poverty,” Stern said. “These bureaucrats and regulators aren’t the ones who are going to be hurt by the collateral damage.”