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Americans for Tax Reform supports Rep. Warren Davidson’s (R-Ohio) Middle Class Borrower Protection Act of 2023 (H.R. 3564). This bill repeals new mortgage fees that have been altered to subsidize riskier borrowers.

Fees charged on mortgages purchased by Fannie Mae and Freddie Mac (the Enterprises) should be based on the credit risk of the borrower, full-stop. The changes to the new fees, or loan-level price adjustments (LLPAs), cross-subsidize risky borrowers (borrowers who are less likely to pay back their mortgages) by charging certain responsible borrowers (borrowers who complete their mortgage payments on time) a higher fee. This is illogical because it puts the Enterprises, which are backed by taxpayers, at a greater risk for losses.

Rep. Davidson’s bill would revert the LLPAs to a framework that prioritizes credit risk and prohibits socialization of LLPAs.


The Enterprises were originally chartered by Congress to boost liquidity in the mortgage market. After the 2008 financial crisis, the Federal Housing Finance Agency (FHFA) took over the Enterprises and placed them into conservatorship. Currently, FHFA is the primary regulator for the Enterprises and the Federal Home Loan Bank System. Additionally, the U.S. Treasury owns rights to acquire about 80% of the Enterprises common stock, which means they have a taxpayer-funded backstop.

On May 1, 2023, by the direction of FHFA, the Enterprises changed the pricing scheme for LLPAs. LLPAs are one-time upfront fees charged to lenders when the Enterprises purchase single-family mortgages. These fees are charged as insurance against mortgage default risk. LLPAs get passed on from lenders to borrowers in the form of higher interest rates. This is intended to mitigate lender risk, or in the case of the Enterprises, guarantor risk.

FHFA increased fees for “half of all borrowers with FICO scores over 680” while also “decreasing fees for 90 percent of lower credit quality borrowers (those with FICO scores under 680) regardless of how much of a down payment they made.” These changes reflect the mission of FHFA under the Biden administration—to socialize the American housing market. The changes to the LLPAs were made with the intent of rewarding irresponsible borrowers and creating a government-imposed “level-playing field” in homeownership. Ultimately, this will only exacerbate risk in the housing market and could potentially result in risky behavior that is reminiscent of the 2008 housing crisis.

Fortunately, H.R. 3564 would reverse the harmful effects of FHFA’s LLPA changes. The bill would force FHFA to revise all the pricing for fees to be the same as it was before May 1st. The bill also:

  • directs future LLPAs to be based on credit risk;
  • prohibits FHFA from further revising the fees until after the Government Accountability Office (GAO) reviews FHFAs process for setting fees;
  • bans FHFA from using any LLPA that is based on a borrower’s debt-to-income ratio; and
  • requires the process for setting new LLPAs to be as close as possible to the notice and comment process as established under the Administrative Procedure Act

H.R. 3564 passed the House Committee on Financial Services on May 24th and was approved as amended by the House Committee on Rules on June 20th, with a floor vote scheduled for Friday, June 23rd.

ATR applauds Rep. Davidson for his leadership on this issue and encourages all lawmakers to ensure this bill passes the House and subsequently passes the Senate.