DV Journal

Three Delaware Valley congresswomen voted to keep President Joe Biden’s new policy that lowers mortgage fees for borrowers with poor credit and raises them for would-be home buyers who’ve earned higher credit scores.

Democratic Reps. Madeleine Dean (Montgomery), Mary Gay Scanlon (Delaware/Philadelphia), and Chrissy Houlahan (Chester/Berks) voted against the Middle-Class Borrower Protection Act that would reverse the fee changes that Fannie Mae and Freddie Mac now charge.

Rep. Brian Fitzpatrick (R-Bucks) and Rep. Susan Wild (D-Lehigh) voted for the bill to stop the new fee structure. It passed the House Monday on a 230-189 bipartisan vote, with all Republicans present, plus 14 Democrats.

“In May, the Federal Housing Finance Agency (FHFA), the agency which oversees Fannie Mae and Freddie Mac, made changes to the structure of upfront mortgage fees that would result in higher costs for borrowers with higher credit scores,” Fitzpatrick told DVJournal. “Hardworking middle-class families looking to purchase a home should not have to subsidize less creditworthy, riskier borrowers. We must ensure our housing finance system remains stable so we avoid a repeat of the 2008 financial crisis while pursuing bipartisan solutions to housing affordability. I am happy to see the Middle-Class Borrower Protection Act pass the House with a bipartisan vote.”

Biden’s progressive policy, which took effect May 1, promotes “social justice” by reducing lending fees on borrowers with lower credit scores. Meanwhile, home buyers with a credit score over 680 will pay about $500 more per year on a $400,000 loan. That adds up to more than $14,000 throughout a 30-year mortgage.

And borrowers who put aside enough in savings for a 20 percent down payment will pay the highest fees under the new FHFA policy.

Rep. Warren Davidson (R-Ohio), who introduced the act, repeatedly said the new fee structure is “a socialist redistribution of wealth.”

“It’s a scheme created by the Federal Housing Finance Agency that forces financially responsible homebuyers with good credit to subsidize those with bad credit. Responsible action should never be penalized, and irresponsible action shouldn’t be subsidized. Under this rule, most new homebuyers will pay higher fees to offset the costs of riskier borrowers,” Davidson said.

Under the new LLPA (Loan-Level Price Adjustment) fee schedule, the borrower with modest credit — 640 to 659 — who puts down just 5 percent would enjoy a fee drop from 2.75 percent to 1.5 percent. But a borrower with good credit (740-759) with a 20 percent down payment would see their fee double from 0.5 percent to 1 percent.

Republicans and many responsible borrowers have lashed out against the policy, described by critics as income distribution applied to home ownership. Some 18 Republican governors also opposed the policy.

“We write to you in regard to the mandated May 1, 2023, changes to the loan level pricing adjustment (“LLPA”) structure employed by Fannie Mae and Freddie Mac and ask that you reverse course on behalf of hardworking Americans across the country,” the Republicans said in a letter to President Joe Biden and his Federal Housing Finance Agency Director Sandra Thompson.

“In short, the new LLPA framework will inevitably increase mortgage costs for lower-risk individuals and handicap those borrowers with larger down payments. Further, the changes provide no incentive to borrowers to maintain good credit and will confuse borrowers at all credit levels.”

“Your actions are threatening the American housing system,” they added.

Treasurers and finance officials from 27 states, led by Pennsylvania Treasurer Stacy Garrity, also urged Biden to end his “unconscionable” policy that requires people with good credit scores to subsidize mortgage loans for others.

“This new policy makes it more expensive for people with good credit to buy houses – and that’s absurd,” said Garrity. “Americans who have built a good credit score and saved enough to make a strong down payment should not be penalized and forced to pay more on their mortgage every single month. I’m proud that so many of my colleagues from across the country – representing a majority of states – have united to urge the immediate elimination of this policy.”

Dean, Houlahan, Scanlon, and Wild declined to respond to requests for comment.

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