A coalition of 18 Republican governors called on the Biden administration to reverse the Federal Housing Finance Agency’s (FHFA) changes to the Fannie Mae and Freddie Mac loan level pricing adjustment (LLPA) structure for borrowers seeking a mortgage.
“The new LLPA framework will inevitably increase mortgage costs for lower-risk individuals and handicap those borrowers with larger down payments,” said the governors in an open letter to President Biden and FHFA Director Sandra Thompson. “Further, the changes provide no incentive to borrowers to maintain good credit and will confuse borrowers at all credit levels. Disincentivizing good credit behavior and penalizing responsible Americans during an inflation crisis – which required the Federal Reserve to increase interest rates 10 consecutive times in a year – is wrong and unreasonable.”
The governors blamed the administration for risking the viability of the housing market.
“Your actions are threatening the American housing system,” they continued. “By upending the existing financing model that relies on individual financial responsibility, you are increasing uncertainty in the housing market and our nation’s economy. As noted by Senate Republicans on April 26, the LLPA mandates will “distort the cost of lending in U.S. housing markets, making the entire system less efficient and costlier for all Americans.”
The governors added a call for the administration to immediately rescind the LLPA update, adding that “Congress must take action” if the Executive Branch does not.
There was no public comment from the White House or the FHFA on the letter. Missouri Gov. Mike Parson, the co-leader of the coalition, said in a statement that LLPA policy was typical of the administration’s handling of the economy.
“Only the Biden administration would think it can solve a supply issue by subsidizing demand and bad credit,” he said.
Photo by Gage Skidmore / Flickr Creative Commons