Today, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, took to the House floor in opposition of H.R. 3564, a Republican bill that would hurt homeownership for middle-class families, and urged her colleagues to vote “no.”
I rise in strong opposition to H.R. 3564, the “MAGA Housing Scam Act,” which follows the blueprint of the GOP Tax Scam by helping the wealthy at the expense of the middle class. Homeownership is a quintessential part of the American dream, and it is the single most important way that households today can build wealth. That is why expanding access to homeownership is one of the best ways that we can grow the middle class.
Unfortunately, the dream of homeownership is becoming further out of reach for a growing number of households due to a worsening storm of rising interest rates and home prices, fueled by an undersupply of new housing. In fact, house prices have skyrocketed by 40% since 2020, and first-time homeownership rates have plummeted to all-time lows. Moreover, housing costs are a primary driver of inflation, which is hurting every household in America. It is against this backdrop that Republicans are actually working to make homeownership more expensive for everyone, especially the middle class.
The “MAGA Housing Scam Act” would affect two different types of fees that apply to mortgages backed by Fannie Mae and Freddie Mac, which make up the vast majority of mortgages today. First, this bill would extend a guarantee fee of 10 basis points for another year, costing ALL future homebuyers an additional $5 billion.
Second, this bill would reverse recent changes to loan level price adjustments – or LLPAs – which are another type of fee on mortgages backed by Fannie and Freddie. The amount of this fee is risk-based, meaning that it varies depending on characteristics of the borrower and loan, such as income and down payment; whether the loan has a fixed or variable rate of interest; and whether the loan is a cash out refinance. FHFA, which is the agency that regulates Fannie and Freddie, is responsible for determining the amount of LLPAs and recently made changes to this fee to help middle class borrowers. To illustrate, a middle-class borrower with excellent credit, who makes maybe a 5% down payment on a median priced home would have their LLPA reduced by nearly half under FHFA’s changes.
This bill would reverse the recent changes made by FHFA, resulting in higher fees for middle-class borrowers. Again, the LLPAs are only one of two fees affected by this bill. Altogether, this bill would hit middle-class borrowers with a double whammy of both an extension of a 10-basis point guarantee fee and an increase in LLPAs.
During the debate in the Rules Committee on this bill, I pointed out how this bill hurts middle class borrowers who have worked hard to build excellent credit, but can’t afford a 20% down payment. Republicans doubled down, insisting that those with lower down payments are riskier borrowers and deserve to pay more. What they failed to understand is that middle class borrowers, who can’t afford a 20% down payment, are already required to purchase private mortgage insurance, which can add hundreds of dollars to a borrower’s monthly mortgage costs. Private mortgage insurance protects Fannie and Freddie from the risks associated with the lower down payment. Charging a higher LLPA for risks that are already covered by an insurance policy is simply unfair.
During the Rules Committee debate, Republicans also called FHFA’s changes “redistributive.” Let’s be clear, FHFA made changes to ensure that middle class homebuyers are not unfairly charged more for risks that are already covered by private mortgage insurance. This is hardly redistribution – it’s ensuring that middle class borrowers have a fair shot at homeownership. Mr. Davidson’s bill, on the other hand, would absolutely redistribute costs from the middle class to the wealthy. Let me break this down for the record. The nonpartisan Congressional Budget Office determined that this bill will cost $1.8 billion before the addition of the manager’s amendment. That represents $1.8 billion in fees that otherwise would have primarily affected the wealthiest homebuyers who would barely notice such a nominal fee increase. In order to pay for this cost, Republicans added a 10-basis point guarantee fee that would increase costs for all homebuyers to the tune of $5 billion.
For all these reasons and more, I urge my colleagues to oppose H.R. 3564.
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