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House Republicans Are Protecting Middle Class Homebuyers

House Republicans are fighting against the Biden Administration’s new Socialist tax, which unfairly penalizes creditworthy homebuyers, with H.R. 3564, the Middle Class Borrower Protection Act of 2023. The Biden Administration’s new tax not only endangers our already fragile housing economy, but places a burden on hard working Americans who want to purchase a home.
  • H.R. 3564, the Middle Class Borrower Protection Act of 2023, would eliminate the Biden Administration’s new socialist tax on creditworthy homebuyers to subsidize those with riskier loans.
    • This pricing change increased fees on one-out-of-every-two borrowers with higher credit scores who finance their loans through Fannie Mae and Freddie Mac (the GSEs).
    • At the same time, it cut the fees paid by nearly every highest risk borrower with the worst credit scores, creating new concerns regarding the GSE’s safety and soundness.
  • H.R. 3564 would repeal the changes made to the LLPA fees, as well as make several modifications to how FHFA sets upfront fees on mortgages in the future.
  • The bill requires GAO to complete an independent study of the process and data used by FHFA to change LLPA prices, including the impact of those changes on the safety and soundness of the GSEs, and report to Congress within one year.
  • FHFA would be prohibited from changing LLPAs until 90 days after that report, after which it would be required to:
  • Follow a basic government agency notice-and-comment procedure for making any new changes to LLPA fee, and
  • Ensure that future fee adjustments be made on the basis of the actual risk posed by the mortgage.
  • Finally, FHFA would be prohibited from imposing any new fee on borrowers based on their debt- to-income (DTI) ratio, a change that FHFA had proposed but then rescinded in May.
  • Fifteen years ago, the GSEs began charging a new one-time upfront fee called a loan level pricing adjustment (LLPA) as a risk-based pricing tool to encourage responsible lending and to protect taxpayers from undue risk.
  • These fees were set on the credit score and down payment amount for each loan the GSEs purchased – the higher a loan’s credit score or down payment amount, the lower the fee.
  • The GSEs charge LLPAs to lenders who then pass them on to consumers in the form of higher interest rates.
  • On May 1, 2023, the Federal Housing Finance Agency (FHFA), the agency which oversees the GSEs, “recalibrated” how LLPA fees are set for the majority of primary residences.
  • This pricing change increased fees for many borrowers while cutting fees for a handful of borrowers with the worst credit history.
  • In fact, every borrower with a credit score under 680 will see their fees reduced or kept the same, regardless of their down payment level, while half of all borrowers with scores above 680 will see their fees go up.
  • That threshold is important because nearly 19 out of 20 Americans have credit scores above 680.