The National Association of Mortgage Brokers (NAMB) declared its support this week for a bill introduced by Republicans in the U.S. House of Representatives that would reinstate the Loan Level Price Adjustment (LLPA) structure that was in place prior to May 1, 2023.
Lawmakers proposed similar legislation in April. However, it was more limited in scope and sought to cancel the changes announced in January and continue risk-based pricing.
The new version seeks to restrict Federal Housing Finance Agency (FHFA) adjustments to the single-family pricing framework and prohibit LLPA changes based on debt-to-income ratio.
If passed, the bill would also direct the Government Accountability Office (GAO) to “conduct a study of the revisions made by the [FHFA] to the standard single-family pricing framework under the recalibrated single-family pricing framework” by analyzing the basis for such revisions; inputs supplied by the GSEs; and how proposed revisions comply with the Enterprise Regulatory Capital Framework.
“Borrowers who have demonstrated a propensity to manage credit in a responsible manner should not be penalized when obtaining financing,” said NAMB President Ernest Jones in the announcement. “There is data which shows that lower credit scores do not directly correlate to lower income, furthermore, there are higher income earners who fail to manage credit effectively.”
The earlier version of the bill passed the House Financial Services Committee in May. However, the passage was along partisan lines, and the issue should face an ideological split between political parties, NAMB said.
“NAMB believes opposition to this policy should not be a partisan issue, it is a matter of fundamental fairness,” the association said.
The proposed LLPA changes caused an uproar when announced earlier this year. The main issue stemmed from the belief that the changes would punish borrowers with good credit, which FHFA Director Sandra Thompson characterized as a misconception.
The changes were later rescinded, but not before House Republican lawmakers took aim in a House Financial Services subcommittee hearing and an additional hearing with Thompson as a witness.
“I want to be very clear on one key point, and one that bears repeating: under the new pricing framework, borrowers with strong credit profiles are not being penalized to benefit borrowers with weaker credit profiles,” Thompson said during the hearing. “That is simply not true.”
The new bill is sponsored in the House by Rep. Warren Davidson (R-Ohio). It currently has 13 Republican cosponsors; no Democrat had signed on as a cosponsor as of June 8. An amendment to the proposed bill was passed out of committee on June 7.