The U.S. House of Representatives last week passed the Middle-Class Borrower Protection Act of 2023, sponsored by Rep. Warren Davidson (R-OH), chairman of the Subcommittee on Housing and Insurance.
In January of this year, the Federal Housing Finance Agency (FHFA) announced a new fee structure for Fannie Mae and Freddie Mac that would become effective on May 1. In an effort to provide “equitable and sustainable access to homeownership,” noted the FHFA, the change would raise upfront costs (such as earnest money, inspection and appraisal fees), which borrowers pay when closing on a mortgage.
The idea that homebuyers with good credit would be charged higher fees and those with bad credit would not was an oversimplification, says the FHFA. Fees would be applicable to loan terms longer than 15 years and were to be broken down by credit score, down payment category, fee percentage and property types listed in Fannie Mae’s Loan-Level Price Adjustment (LLPA) Matrix. Similar to the previous fee structure, the updated fees would commonly increase as credit scores decrease, no matter the level of down payment.
The Republican-led House of Representatives’ answer to the fee restructuring is the Middle-Class Borrower Protection Act, which reverts to the former LLPA mortgage structure and places a temporary one-year freeze on the FHFA’s ability to make new LLPA fee changes.
The bill moves to the Senate next for consideration.
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