A new rule from the Biden administration will have good-credit home buyers paying more monthly to subsidize costs for high-risk buyers. 

The changes, which will begin in May, have many experts worried about the impacts both on buyers and the economy. 

Real estate expert and Madison Ventures+ managing director Mitch Roschelle unpacked the "madness" on "Varney & Co" Thursday. 

"It's bizarro world," he said. "That fee that's charged, PMI, which is personal mortgage insurance, that fee that FHA charges is intended to punish those with lower credit scores and riskier loans, so basically level the playing field from a risk perspective. Well, what are we doing? We're doing the opposite."

EXISTING HOME SALES UNEXPECTEDLY FALL IN MARCH, REVERSING RECENT GAINS

On "Mornings with Maria" earlier Strategic Wealth Partners CEO Mark Tepper also slammed the measure arguing that it is "socialism for homeowners."

"We mentioned the student loan issue. Cab drivers who never went to college are subsidizing that student loan debt, and in this situation, this Biden administration more and more often, they are making decisions to reward bad decisions," the financial expert said. 

Experts believe that borrowers with a credit score of about 680 would pay around $40 more per month on a $400,000 mortgage under rules from the Federal Housing Finance Agency that go into effect May 1 – costs that will help subsidize people with lower credit ratings also looking for a mortgage, according to a Washington Times report Tuesday.

"If you have a high credit score, and 680 is a good credit score, you have to pay more. And we're talking about real money. This could be $100 a month more depending on the size of your loan. So it makes no sense," Roschelle said. "And by the way, this isn't about first-time homebuyers. There's nothing in this rule that says it applies to first-time homebuyers. It applies to anybody borrowing money that's insured by FHA. It's madness."

The Federal Housing Finance Agency, which oversees federally backed home mortgage companies Fannie Mae and Freddie Mac, has long sought to give consumers more affordable housing options.

Under the new rules, consumers with lower credit ratings and less money for a down payment would qualify for better mortgage rates than they otherwise would have.

"That's not the way you grow as a country, as an economy, by essentially saying, hey, if you spent recklessly, you lived above your means and you stopped making your payments on time, have no fear. Someone who's done it the right way is going to pay for you. That's not what capitalism is all about, and it puts us in a situation where there's no consequences when you make bad decisions," Tepper added.

Federal Housing Finance Agency Director Sandra Thompson said the new rules are designed to "increase pricing support for purchase borrowers limited by income or by wealth" and come with "minimal" fee changes.

EXISTING HOME SALES UNEXPECTEDLY FALL IN MARCH, REVERSING RECENT GAINS

While Biden's rule change will add another headache for homebuyers, Roschelle conceded complying with the rules, regulations and various documentation when applying for a mortgage is already "brutal."

"They say it's a financial colonoscopy and it's brutal," Roschelle said. "And guess what, if you're borrowing from your local community banks that's under tremendous pressure, it's even harder."

Beyond frustration with the rule, experts are concerned this will further exacerbate the difficult housing market.

Roschelle explained the real estate market is slumping and Biden's rule is "going to slow it more."

"We're down from selling 6 million houses on an annualized basis to 4.4. So realtors are finding it really hard to make a living. But, you know, the supply of homes is still alarmingly low. And on the price side, homes are $100,000 more expensive today than they were in February of 2020. So we still have that affordability problem."

Tepper also said the "real estate market [is] basically at a standstill because sellers… don't want to lower their price because they know what their neighbor sold for nine months ago."

"Buyers don't have the buying power they used to have. So transactions aren't happening. You throw in the fact that existing home inventory is at an all-time low, and then we looked at recent data for building permits and housing starts. There aren't building new homes either," he continued.

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Fox News' Michael Lee contributed to this report.