New Hampshire Democratic Rep. Annie Kuster rejected a bipartisan effort to block a Biden administration policy lowering mortgage fees on borrowers with poor credit and raising them on would-be home buyers who have earned higher credit scores.
The 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 Federal Housing Finance Agency (FHFA) policy.
On Monday, the U.S. House of Representatives voted 230-189 to pass the Middle-Class Borrower Protection Act. It would reverse those changes. The bill had the backing of every Republican plus 14 Democrats, including Rep. Chris Pappas (D-N.H.)
But Kuster, the most progressive Granite State congressional delegation member, voted to kill the bill.
Kuster would not respond to requests for comment regarding her vote, and she had not posted a statement as of Monday night.
“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. Gov. Chris Sununu joined 17 fellow GOP governors in opposing the policy.
“This foolish proposal would force homeowners with good credit to pay the mortgage bill for borrowers with bad credit,” Sununu said. “I can’t imagine why the Biden administration thinks punishing responsible homeowners with increased mortgage costs would ever make for good policy.”
Supporters of the new fees argue the FHA needs more revenue to protect Fannie Mae and Freddie Mac from another 2008-style meltdown. And while it is true that fees are going up for borrowers with good credit, those with poor credit will still pay more.
Opponents of the policy, including the 18 governors, say it will undermine individual responsibility and promote “uncertainty” in the economy.
“By upending the existing financing model that relies on individual financial responsibility, you are increasing uncertainty in the housing market and our nation’s economy. As noted by Senate Republicans on April 26, the LLPA mandates will ‘distort the cost of lending in U.S. housing markets, making the entire system less efficient and costlier for all Americans.’
The bill will now go to the U.S. Senate, where both Sens. Maggie Hassan and Jeanne Shaheen have repeatedly voted against bipartisan legislation and with the Biden administration on issues from so-called “ESG investing” to the proposed $500 billion student loan bailout.
Neither senator responded to multiple requests for comment regarding the new mortgage fee policy.