Escalated.pdf

On April 25, 2023, Chairmen Patrick McHenry and Warren Davidson of the House Committee on Financial Services' Subcommittee on Housing and Insurance wrote to Sandra Thompson, Director of the Federal Housing Finance Agency (FHFA), expressing strong disapproval of recent changes to upfront loan level pricing adjustments (LLPAs) for Fannie Mae and Freddie Mac (the GSEs).

The authors argue that these changes:

Undermine risk management: They shift the burden from higher-risk borrowers to creditworthy ones, contradicting the principle of risk-based pricing.
Increase mortgage costs: Lenders will likely pass on the new LLPA costs to borrowers through higher interest rates and reduced access to credit.
Promote risky behavior: The policy punishes responsible borrowers and incentivizes lower down payments and more debt.
Harm housing markets: These changes risk further destabilizing an already uncertain housing market.

McHenry and Davidson urge Director Thompson to:

1. Reverse these changes to prevent lasting harm to the housing economy.
2. Eliminate what they consider an unfair tax on creditworthy borrowers.
3. Reassess FHFA's authority to mandate similar pricing changes in the future.

They threaten legislative action if FHFA is unwilling or unable to address these concerns.