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Congress Faces Off Against Controversial Loan Fees: The Battle for Borrowers’ Wallets

Eye has been following this big news in the mortgage industry and a group of Republican lawmakers are jumping on board with us.

The recently introduced loan level pricing adjustment (LLPA) fees by the Federal Housing Finance Agency (FHFA) have hit a roadblock as a group of Republican lawmakers in the House of Representatives, led by Rep Andy Biggs, R.-Ariz., have introduced the “Responsible Borrower Protection Act of 2023” to block the amended pricing framework for Fannie Mae and Freddie Mac, citing concerns over increased pricing for borrowers with higher debt-to-income (DTI) ratios and eliminating upfront fees for certain groups.

The Mortgage Bankers Association (MBA), the National Association of Realtors (NAR), and Community Home Lenders of America (CHLA) have expressed their dissatisfaction with the new framework, citing worries that the fee hikes would negatively impact middle-class homebuyers and individuals looking to purchase second homes during a challenging period for the real estate industry.

One specific concern raised by lending groups is the use of DTI-based adjustments, which they argue is an inefficient metric for determining a borrower’s ability to repay, as a borrower’s income and expenses can fluctuate during the loan application process, potentially leading to compliance issues and difficulties in properly disclosing prices to borrowers.

In response to these concerns, the FHFA announced a delay in the fees’ implementation, pushing the effective date from May 1 to August 1. However, industry groups, including the MBA and CHLA, continue to advocate for a complete rollback of the pricing changes.

Now, Rep. Andy Biggs and other lawmakers have joined the opposition against the fees, asserting that the new LLPA fees would subsidize mortgage borrowers with lower credit scores. The legislation proposed by Biggs aims to prevent the fees from going into effect and has garnered support from over 30 House Republican colleagues.

Amidst the growing focus on the pricing framework changes, Sandra L. Thompson, director of the FHFA, released a statement addressing misconceptions surrounding the fees. Thompson clarified that the recalibration of fees does not charge higher-credit-score borrowers more to benefit lower-credit-score borrowers, but rather, the fees generally increase as credit scores decrease for any given down payment level. She also highlighted that some fees may be higher or lower, and the elimination of upfront fees for borrowers with lower incomes is supported by higher fees on products like second homes and cash-out refinances.

The “Responsible Borrower Protection Act of 2023” has garnered support from 33 Republicans in Congress, presenting a significant challenge to the FHFA’s pricing framework changes. Call your Congressman and suggest he/she get on board with this act. It’s important and it’s a big deal.

Billie Tucker Volpe

Billie Tucker Volpe Founder of Eye on Jacksonville and Leadership Consultant to CEOs/Executives.


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