The House today passed the Middle Class Borrower Protection Act, legislation that would block the Federal Housing Finance Agency (FHFA) from implementing a new pricing framework for single-family home loans eligible for purchase by Fannie Mae and Freddie Mac that will lower mortgage fees for some borrowers and raise fees for others. The revised fees became effective on May 1.
Earlier this year, NAHB Chairman Alicia Huey sent a letter to FHFA Director Sandra Thompson opposing increased fees for home buyers making significant downpayments and having high credit scores. Huey expressed particular concern that borrowers facing the largest fee increases were those with credit scores between 720 and 760 and loan-to-value ratios between 80.01% and 85%.
In a letter to lawmakers before the House vote, NAHB expressed concerns about Congress intervening in the administration of Fannie Mae and Freddie Mac’s single-family guarantee fee pricing. NAHB believes this is counterproductive because it will create uncertainty in the housing sector whether Fannie and Freddie can provide a dependable flow of affordable mortgage liquidity in all markets and throughout all economic cycles. Rather, Congress should remain focused on the goal of comprehensive reform of the housing finance system, including Fannie Mae and Freddie Mac, and fixing the structural flaws that persist 15 years after the Great Recession.
The bill also calls for Fannie Mae and Freddie Mac to extend a separate 10-basis-point guarantee fee increase to pay for the cost of the legislation. Guarantee fees, also known as g-fees, cover projected credit losses from borrower defaults over the life of the loans, administrative costs, and a return on capital. NAHB’s letter expressed concern that higher g-fees charged to borrowers hurt home buyers and housing affordability.
The Senate is unlikely to consider this legislation.