Last week, the U.S. House of Representatives passed the “Middle Class Borrower Protection Act of 2023,” legislation sponsored by Rep. Warren Davidson (R-Ohio) that was designed to cancel controversial changes to loan-level pricing adjustments (LLPA). The LLPA changes were announced earlier this year by the Federal Housing Finance Agency (FHFA).
The measure — which recently earned the support of the National Association of Mortgage Brokers (NAMB) — passed on a vote of 230-189, with the House Republican conference voting unanimously in its favor. Fourteen Democrats crossed party lines to join Republicans, according to the office of the U.S. House’s clerk.
“The Biden administration wants to use mortgage fees to put their finger on the scale and decide who gets to pay more and who gets to pay less,” House Financial Services Committee Chairman Patrick McHenry (R-N.C.) said in a statement. “This will make housing less affordable, not more, and puts taxpayers at risk by threatening the safety and soundness of our housing finance system.”
Nearly 95% of Americans have credit scores above 680, and the group could face an extra $1.8 billion in new fees over the next two years under the LLPA plan, according to McHenry.
“House Republicans are taking action to protect middle-class borrowers with Rep. Davidson’s bill and I was proud to support it on the House floor,” McHenry said.
“The Biden administration’s mortgage rule is a socialist redistribution of wealth. I’m glad to see my colleagues recognize this issue and pass my legislation to reverse this rule,” Davidson added.
The proposed LLPA changes caused uproar when announced earlier this year. The main issue stemmed from the belief that the changes would punish borrowers with good credit, which FHFA Director Sandra Thompson later characterized as a misconception.
The changes specific to conventional borrowers with debt-to-income (DTI) levels at or above 40% were ultimately rescinded, but not before House Republican lawmakers took aim in a House Financial Services subcommittee hearing and an additional hearing with Thompson as a witness.
“I want to be very clear on one key point, and one that bears repeating: under the new pricing framework, borrowers with strong credit profiles are not being penalized to benefit borrowers with weaker credit profiles,” Thompson said during the hearing. “That is simply not true.”
According to the entry on the U.S. Congress website, the bill has yet to be introduced in the U.S. Senate. It’s unclear if the bill will make it to the floor of that chamber, where the legislative agenda is controlled by a Democratic majority.
Editor’s note: This story has been updated to specify that the rescinded changes were specific to conventional borrowers with debt-to-income (DTI) levels at or above 40%.
Wasn’t it only the DTI portion of the LLPA changes that was rescinded? All the others were left in place, I believe.