Kansas Senator files bill to reverse Biden administration mortgage rule

U.S. Sen. Roger Marshall, R-Kansas, has teamed up with his fellow Republican lawmakers in opposing the Biden administration's proposed changes to mortgage rate calculation.

With U.S. Sen. Mike Braun, R-Indiana, and others, he introduced the Middle Class Borrower Protection Act. It would block the Biden administration's Loan-Level Price Adjustment (LLPA) rule changes that raised interest rates for home buyers with good credit to lower rates for those with bad credit. The bill would reverse this to lower rates for those with good credit scores.

The proposal has 15 co-sponsors in the Senate, including U.S. Sen. Jerry Moran, R-Kansas. Its companion bill, introduced in the U.S. House last month by U.S. Rep. Warren Davidson, R-Ohio, passed with bipartisan support.

"It is ludicrous to punish fiscally responsible buyers by charging them a higher fee in order to give risky borrowers loan-level price adjustments," Senator Marshall said in a press release issued by his office. "Our bill will reverse this misguided choice and require the FHFA to follow the established rules and administrative procedures when making changes like this. This is unfair to every American who has worked hard and managed their finances responsibly – they shouldn't have to pay more and be penalized for the choices of others."

Braun said that most American homeowners have good credit, so it doesn't make sense to penalize them to the benefit of a few.

"The average American has a credit score over 716," Braun said. "The Biden administration is making homeownership more difficult for everyday Americans by raising rates for most people with a credit score over 680 to subsidize riskier borrowers. I urge my colleagues in the Senate to quickly vote to overturn this unfair rule that penalizes fiscal responsibility."

Additionally, Moran said what the Biden administration is doing will make home ownership less attainable, which he opposes.

"Helping Americans achieve the dream of homeownership shouldn't require punishing homebuyers with good credit," Moran said in the release. "Rather than subsidizing high-risk borrowers and punishing fiscal responsibility, the federal government needs to be focused on reducing housing costs to make homes more affordable for all Americans."

The bill comes in response to a decision made by the Federal Housing Finance Agency on May 1, 2023. The new rule changes the country's Loan Level Pricing Adjustments (LLPA) policy. They are one-time, upfront fees charged to lenders when Fannie Mae and Freddie Mac (GSEs) purchase their loans.

The borrowers pass the fees off in the form of higher interest rates, according to Marshall's office. As a result, the change raises rates for those with credit scores above 680 "to subsidize relatively lower rates for those with credit scores below that threshold," according to the release.