The House has advanced legislation to scrap a Biden administration rule that increased mortgage rates and fees for some home buyers with good credit while charging less for some with riskier credit ratings.
In a bipartisan 230-189 vote, 14 Democrats joined the Republican majority to approve the repeal of the Federal Housing Finance Agency’s mortgage rule.
The fee changes, which went into effect on May 1, were part of a push to expand homeownership. The changes were enacted by federally backed home lending giants Fannie Mae and Freddie Mac.
House Republicans said that the rule change was a “socialist policy” that penalized people with higher credit scores and promoted “bad behavior.”
Rep. Warren Davidson, the Ohio Republican who authored the bill, said the explicit purpose of the rule change was to grow revenue for the government-backed lenders.
“The American people should be angry, should be upset, because the Biden administration did impose a socialist redistribution scheme,” he said before the vote Friday.
The change caused new borrowers with a credit score of 680 or higher to pay more in fees compared to homebuyers with lower credit scores, which critics said would effectively subsidize higher-risk mortgages to make housing more viable for first-time buyers.
Mr. Davidson said that “most Americans would likely be hurt” by the rule change because the average credit rating in the country is over 700.
Repealing the new fee structure is just one facet of the legislation. Mr. Davidson’s bill would also commission a study from the Government Accountability Office to determine the effect of fee changes and prohibit new fees on borrowers based on their debt-to-income ratios.
FHFA Director Sandra Thompson said there were misconceptions about the new fees such as calling it a subsidy. She said that borrowers with higher credit scores would not be charged more so borrowers with low credit scores can pay less.
House Democrats said that the legislation would ultimately result in higher costs for homebuyers.
Rep. Maxine Waters of California, the ranking Democrat on the House Financial Services Committee, said that people with higher credit scores are typically first-time buyers who would be hit with a “double whammy” of costs from the legislation.
One is through an extension of a guaranteed fee of 10 basis points until 2033 that Mrs. Waters said would cost homeowners up to $5 billion. The other is from the cost of private mortgage insurance that homeowners who cannot make a 20% down payment are forced to buy.
“This is an unfair double charge on middle-class borrowers for the same risk,” Mrs. Waters said.
The White House opposed the legislation, saying that the bill would hamper the FHFA’s ability to “respond to changing housing market conditions” and “ensure the safety and soundness” of Fannie Mae and Freddie Mac.
House Financial Services Committee Chairman Patrick McHenry, North Carolina Republican, called the fee change a Biden administration tax on people with good credit scores.
“Is it right to raise the cost of borrowing for families that have saved up to buy a home to subsidize more families that are less creditworthy?” he said. “I don’t think so.”