A third bill introduced last month by Republicans in Congress seeking to repeal the recent controversial changes to the single-family pricing framework for Fannie Mae and Freddie Mac will be considered by the U.S. House of Representatives.
The latest bill, introduced May 22 in the House by Rep. Warren Davidson, R-Ohio, was first referred to the House Financial Services Committee. H.R. 3564 is titled the “Middle Class Borrower Protection Act of 2023,” and seeks to “cancel recent changes made by the Federal Housing Finance Agency (FHFA) to the up-front loan-level pricing adjustments (LLPAs) charged by Fannie Mae and Freddie Mac for guarantee of single-family mortgages, and for other purposes.”
The bill has 13 co-sponsors, including two representatives who had each introduced similar bills in April — Rep. Stephanie Bice, R-Okla., and Rep. Andy Biggs, R-Ariz. Their bills, H.R. 2876 and H.R. 2928, were also referred to the Financial Services Committee.
The committee voted 26-22 on May 24 to send an amended version of the latest bill to the full House for consideration.
Unlike the first two bills, which were vague in how they would accomplish their goal, the new bill includes text with specific actions intended to return the status quo that existed before the changes were put in place.
The bill states: “Not later than the expiration of the 60-day period beginning on the date of the enactment of this act, the director of the Federal Housing Finance Agency shall revise the recalibrated single-family pricing framework charged by the enterprises for guarantee of mortgages on single-family housing so that such fees are identical to the fees of the standard single-family pricing framework in effect immediately before May 1, 2023.”
May 1 is the date when the changes officially went into effect. The FHFA had announced the changes on Jan. 19, introducing redesigned and recalibrated upfront fee matrices for purchase, rate-term refinance, and cash-out refinance loans.
At the time, FHFA Director Sandra L. Thompson said the changes would strengthen the “safety and soundness” of the government-sponsored enterprises (GSEs) — Fannie Mae and Freddie Mac — by “enhancing their ability to improve their capital position over time.”
Since then, critics — including Republicans in Congress — have said the new rules force those with stronger finances to subsidize those who need help, essentially robbing the rich to help the poor. Thompson has pushed back on those complaints, saying such claims are the result of a “fundamental misunderstanding” of the fees and why they were updated.
In addition to returning the single-family pricing framework back to where it was before May 1, the latest bill also would temporarily prohibit “further adjustments” to the pricing framework for 90 days to allow for a review by the General Accounting Office (GAO).
According to a memo sent to the Financial Services Committee by Republican staff members, the bill “directs GAO to review the process FHFA uses to set LLPA fees,” and “makes future LLPA fee changes subject to a standard notice and comment procedure, requires future conservator-mandated LLPA fee changes to be risk-based, and prohibits the imposition of any new LLPA fees based on the debt-to-income (DTI) ratio of borrowers.”
The latter prohibition refers to upfront fees the FHFA intended to impose based on borrowers' debt-to-income (DTI) ratios for loans acquired by Fannie Mae and Freddie Mac. Following objections from the Mortgage Bankers Association (MBA) and other groups, FHFA announced on May 10 that it would rescind the fees.
The National Association of Mortgage Brokers (NAMB) issued a statement on June 7 in support of the new legislation.
“The changes to the loan-level price adjustment matrix by the Federal Housing Finance Agency went into effect May 1, and mortgage brokers across the country continue to oppose 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,” NAMB said in its statement. "Borrowers who have demonstrated a propensity to manage credit in a responsible manner should not be penalized when obtaining financing."
NAMB President Ernest Jones added that “there is data which shows that lower credit scores do not directly correlate to lower income; furthermore, there are higher income earners who fail to manage credit effectively."
NAMB added that it believes opposition to the bill should not be “a partisan issue; it is a matter of fundamental fairness.”
