Biden’s FHFA Director Sandra L. Thompson published a statement on their website regarding their new mortgage pricing policies.
She stated there has been a lot of confusion and misunderstandings about the changes made to the pricing framework of Fannie Mae and Freddie Mac, but Director Thompson is setting the record straight.
She begins with, let’s clarify the fees charged by the Enterprises and states Enterprises charge fees to compensate them for guaranteeing borrowers’ mortgage payments, which in turn attracts investors across the globe to provide liquidity for the U.S. mortgage market and ultimately reduces interest rates for homeowners.
Then she tells us that the FHFA, as a safety and soundness regulator, launched a comprehensive review of the Enterprises’ pricing framework in 2021 to ensure that the fees charged align with the expected financial performance and risks of the underlying loans. The series of steps taken by the FHFA to update the pricing framework she believes will bolster safety and soundness, better ensure the Enterprises fulfill their statutory missions, and more accurately align pricing with the expected financial performance and risks of the underlying loans.
She goes on to address some of the misconceptions directly.
First, she believes the updated fees do not mean that higher-credit-score borrowers are being charged more so that lower-credit-score borrowers can pay less. Why? Because the fees associated with a borrower’s credit score and down payment will now be better aligned with the expected long-term financial performance of those mortgages relative to their risks.
Second, she believes the new pricing framework does not provide incentives for a borrower to make a lower down payment to benefit from lower fees. Because borrowers making a down payment smaller than 20 percent of the home’s value typically pay mortgage insurance premiums, so these must be added to the fees charged by the Enterprises when considering a borrower’s total costs.
Furthermore, she believes the changes to the pricing framework were not designed to stimulate mortgage demand. The objectives of the pricing review were to maintain support for purchase borrowers limited by income or wealth, ensure a level playing field for large and small lenders, foster capital accumulation at the Enterprises, and achieve commercially viable returns on capital over time.
So in other words, she believes Biden’s new mortgage policies that he and his far-left team dreamed up will further the safety and soundness of the Enterprises,
which will help them better achieve their mission. They will provide reliable liquidity to the market while also providing more targeted support for creditworthy borrowers limited by income or wealth. And they will do so with a pricing framework that is more accurately aligned to the expected financial performance and risks of the loans they back.
And she also believes the changes made by the FHFA to the pricing framework of Fannie Mae and Freddie Mac will better protect taxpayers in the long term and put the Enterprises on more durable footing, which will allow them to support affordable, sustainable mortgage credit across the economic cycle to the benefit of all Americans.
So there you have it. The Biden Administration has set us straight and you can now stop listening to all those experts in the industry who don’t believe her!
If you want to read her thoughts for yourself, just click here and enjoy the backtracking!