GOP lawmakers prepared to repeal new rule forcing responsible homebuyers to subsidize risky borrowers

Democrats appear to have learned little from the 2008 subprime mortgage crisis that rocked the U.S. economy.

U.S. Reps. Patrick McHenry and Warren Davidson are calling on the Biden administration to reverse recent Federal Housing Finance Agency changes that will increase mortgage costs for responsible homeowners to offset homeowners with riskier credit — changes that the Republican lawmakers say “will result in serious and lasting harm to our housing economy.”

The GOP lawmakers warned in a letter that they are “prepared to take action to repeal [the changes] legislatively and reconsider the parameters of FHFA’s authority under statute to mandate any similar pricing changes going forward.”

McHenry, from North Carolina, is chair of the House Financial Services Committee, and Davidson, from Ohio, is chair of the Housing and Insurance Subcommittee.

“It’s unconscionable to force hardworking Americans to subsidize those who have lower credit scores. Either @FHFA reverses the changes, or the Committee will be forced to repeal them through legislation and reconsider the authority of the FHFA to implement future pricing changes,” McHenry tweeted, in sharing a copy of the letter online.

“We write today to express our disapproval of your recently mandated changes to the upfront loan level pricing adjustment (LLPA) structure employed by Fannie Mae and Freddie Mac (the GSEs),” the letter begins. “These changes cannot be justified from a risk management perspective, and amount to a tax on all creditworthy GSE homebuyers to subsidize borrowers with riskier loans.”

The congressmen say the changes mandated by FHFA in January of this year “violate the fundamental principle of risk-based pricing, namely that lower-risk borrowers should pay lower prices for access to credit than higher-risk borrowers.”

“There is no doubt that lenders will pass on the new LLPA costs to borrowers, which will result in higher mortgage rates and reduced access to credit,” the letter stated. “This new tax also fails the basic test of fairness by punishing borrowers who act responsibly, and will in turn incentivize homebuyers to reduce their down payments and carry additional debt. In short, your new LLPA structure only increases risks to the GSEs and taxpayers while compounding the existing economic uncertainty in our housing markets.”

Tom Tillison


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