Republicans Continue To Fight Mortgage Fee Changes


Changes to fees for loans backed by Fannie Mae and Freddie Mac continue to be a hot topic as Republicans push to repeal them.

The changes to the loan-level price adjustment matrix by officials at the Federal Housing Finance Agency went into effect on May 1 and critics are opposed to the notion that homebuyers with good credit scores and substantial down payments will pay more so fees for borrowers limited by income or wealth can be reduced.

Rep. Warren Davidson, R-Ohio, who introduced the Middle Class Borrower Protection Act on Monday, again attacked the policy on Wednesday. He refers to it as “a socialist redistribution of wealth.”

While speaking before the House Financial Services Committee on Wednesday, Davidson said officials at the FHFA have an extraordinary level of authority in the housing landscape, including over the cost of mortgages for American families. He said his legislation would bring independent oversight to the process of setting the GSE’s upfront fees.

“It would put in place a one-year freeze on FHFA’s ability to make additional fee changes while the GAO, the government accounting office, reviews and brings transparency to the FHFA’s process with underlying data. It would also allow the public and key stakeholders the opportunity to review and comment on any LLPA fee change in the future as any federal agency should do when enacting policies that affect millions of Americans,” Davidson said.

Davidson said the bill, which passed through the committee, comes at a critical time for consumers facing inflation and interest rate increases.

Rep. Mike Lawler, R-NY, who is a cosponsor of Davidson’s bill, introduced the Fairness in Borrowing Act last month. He says “Forcing homeowners with good credit to pay for risky mortgages taken on by those with bad credit is insane and anti-American.”

FHFA Director Sandra Thompson has defended the series of steps they have taken to update the Enterprises’ pricing framework.

On Tuesday, Thompson testified before the House Financial Services Committee.

Thompson said the pricing grids had not been upgraded in many years. Some low-to-moderate income borrowers were overcharged while other borrowers were undercharged prior to the changes, she said.

“In the new pricing grids, borrowers with strong credit profiles are not being penalized at the expense of borrowers with weaker credit profiles. Put another way, even with reduced fees borrowers with lower credit scores and lower down payments will continue to pay higher overall mortgage costs than borrowers with higher credit scores and higher down payments,” Thompson said.

Thompson said mortgage insurance premiums are required for borrowers who put down less than 20%, which does not show up on the pricing grids.

“The less down payment you have, the more mortgage insurance coverage you need and the higher the costs,” Thompson said.

Civil rights and housing policy leaders issued a statement on May 1 supporting the FHFA’s new pricing framework.

In a statement released by the Center for Responsible Lending, leaders argued that the former loan-level price adjustment matrix created in the wake of the 2008 financial crisis had a disproportionate impact on borrowers of color. The organizations urged the Biden-Harris administration to prioritize restoring safe, fair, and inclusive mortgage pricing.

“The updates help address persistent gaps in wealth and homeownership while also improving safety and soundness for Fannie Mae and Freddie Mac (collectively, the ‘Enterprises’). It is unfortunate that recent inaccurate criticism of the updates has been issued without the context of data, analysis, or history,” the statement says.

Housing affordability remains the biggest challenge for shoppers right now.

Mortgage payments on a home purchase today are more than 85% higher than before the pandemic, and wages haven’t kept up, Orphe Divounguy, senior macroeconomist at Zillow Home Loans, told The Mortgage Note in a recent interview.

“With these fee changes, policymakers are trying to level the playing field for first-time buyers. Some borrowers will pay lower fees and some will pay higher fees, but the spread will be smaller,” Divounguy said.

Mortgage applications fell again last week as the average interest rate for 30-year fixed loans rose from 6.57% to 6.69%, the highest level since March.

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