Middle Class Borrower Protection Act of 2023

Floor Speech

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Ms. WATERS. Mr. Chairman, I yield myself such time as I may consume.

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 percent since 2020, and first-time homeownership rates have plummeted to an all-time low.

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 home buyers an additional $5 billion.

Second, this bill would reverse recent changes to loan level price adjustments, better known as 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 downpayment; whether the loan has a fixed or a 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 the LLPAs and recently made changes to this fee to help middle-class borrowers.

To illustrate, a middle-class borrower, say, with excellent credit, who makes maybe a 5 percent downpayment 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 the 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 percent downpayment.

Republicans doubled down, insisting that those with lower downpayments are riskier borrowers and deserve to pay more. What they failed to understand is that middle-class borrowers who can't afford a 20 percent downpayment are already required to purchase private mortgage insurance, which can add hundreds of dollars to a borrower's monthly mortgage cost. Private mortgage insurance protects Fannie and Freddie from the risks associated with the lower downpayment.

Charging a higher LLPA for risks that are already covered by an insurance policy is simply unfair.

During the Rules Committee debate, Republicans called FHFA's changes redistributive. Let's be clear: FHFA made changes to ensure that middle-class home buyers are not unfairly charged more for risks that are already covered by private mortgage insurance.

This is hardly redistribution. It is 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 would 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 home buyers who could 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 home buyers to the tune of $5 billion.

Mr. Chairman, for all these reasons and more, I urge my colleagues to oppose H.R.

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Ms. WATERS. Mr. Chairman, I yield 3 minutes to the gentleman from Missouri (Mr. Cleaver).

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Ms. WATERS. Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, before I delve into additional remarks, the Congressional Budget Office deemed this bill to cost $1.8 billion. Why then would Mr. Davidson, with his amendments, create more money than even the Congressional Budget Office said his bill would cost?

He has raised it $5 billion more. Who pays for that? I don't care how you put it. Whether it is paid for tomorrow, next month, next year, 10 years from now, who pays for that? The home buyers pay for that and that must be noted.

The bill is increased by $5 billion by Mr. Davidson, even more than the Congressional Budget Office said the bill would cost at $1.8 billion. Why would he do that? Why would he charge home buyers more money than even the Congressional Budget Office said the bill would cost?

Accordingly, I will explain further. Currently, middle-class borrowers who cannot make a 20 percent downpayment are charged higher LLPAs and must purchase private mortgage insurance.

I am going to say it again. If you are paying less than 20 percent, you have to get private mortgage insurance to cover the risks that may be posed to the enterprises.

This is an unfair double charge on middle-class borrowers for the same risks. Don't forget, they have paid their g-fees. Everybody has to pay the g-fees to help write the undercosts of the operation of FHFA. They pay those, and it is determined on each individual loan. It depends on the characteristics of that loan.

You build in the question of risk in those fees and then you pay private mortgage insurance, which means the middle-class borrowers are paying more than the wealthy borrowers.

In fact, borrowers with PMI also have excellent credit, with median FICO scores of 754 as of December 2020, and are more likely to be first-time home buyers. They also pose less loss severity to the enterprises than borrowers who have the means to make a downpayment of 20 percent or more.

FHFA's mortgage pricing changes that reduce this unfair double charge on borrowers with PMI is a critical step to making the dream of homeownership attainable for the middle class in America.

I oppose this bill, and I oppose my Republican colleague, who is part of the message going out from FOX News.

I oppose this bill because, first of all, the $5 billion is an increase. The Republicans are forever saying that they are trying to cut budgets. They don't want to increase the amount of taxes. Yet, here he is increasing the amount that he claims he is charging homeowners, when even the Congressional Budget Office says it costs $1.8 billion, and now, he is asking for $5 billion. Well, I don't quite understand that, and nobody else should understand that. It is not needed.

Again, they keep talking about credit scores. These middle-class homeowners, who could not afford to pay maybe 20 percent down, have good credit scores, equal credit scores to the wealthy home buyers. I don't get why he keeps talking about these credit scores.

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Ms. WATERS. Mr. Chair, I yield myself such time as I may consume.

Mr. Chair, I will take a minute to say that the representation that middle-class home buyers who may not have 20 percent down also have bad credit is not true. The record should reflect that that is not true. That is made up by someone who would like to throw credit scores into this argument and argue that these middle-class buyers, who can't pay 20 percent down, all have bad credit. They do not. They have good credit, and they are eligible for a loan. The only thing they don't have is 20 percent down, and they get mortgage insurance in order to cover that.

Mr. Chair, I yield 1 minute to the gentleman from Missouri (Mr. Cleaver).

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Ms. WATERS. Mr. Chair, I yield myself such time as I may consume.

Mr. Chair, the MAGA housing scam act would reverse critical cost savings for middle-class borrowers as provided by FHFA.

Before FHFA's May 1 changes, a middle-class borrower with a high credit score and a 5 percent downpayment on a medium-priced home would have paid an LLPA fee of $81 in addition to private mortgage insurance. Today, this borrower would pay half of that fee, allowing them to access affordable homeownership.

Similarly, a borrower with the same credit score and a 40 percent downpayment on the same priced home would have paid only $27 before May 1 and today pays just $20. These are cost savings that Republicans not only want to eliminate but now they want to add an additional $5 billion in fees for everyone.

This is a scam, not a protection for the middle class. This is messaging by FOX News.

What is that $5 billion for? Why is it that Mr. Davidson is wanting to raise more money than even the Congressional Budget Office says the bill costs? This is not to be understood.

I know that there is an attempt to try to make the argument that somebody wealthier is paying for those who have less income, less money, less resources. It is not true.

Don't eliminate private mortgage insurance. If you pay less than 20 percent, you pay for private mortgage insurance in addition to the GSE fees. Middle-class borrowers were paying more than even the wealthier borrowers, so it had nothing to do with the credit score because the credit score of that home buyer who only paid less than 20 percent is as good as the credit score of the wealthier buyer. It had nothing to do with that at all.

Again, I don't know why this argument is being made by the other side. It is an attempt, I think, to message in a way that goes directly to constituents who they make angrier because their government is making them do something they should not be making them do.

Don't politicize this. This is about homeownership. This is about the American Dream. This is about making sure that those people who can afford to buy a home are able to do so.

The idea that anybody would say that, if you can't make a 20 percent downpayment but can pay for private mortgage insurance, you must not have good credit scores, that is an absolute untruth. As a matter of fact, you would not be able to get that loan if you had bad credit scores.

I wish the opposition would stop making that argument because it does not fly. That person who is paying, again, private mortgage insurance also has a good credit score. They didn't have the 20 percent down, but they are paying for it with their private mortgage insurance.

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Ms. WATERS. Mr. Chairman, I yield myself the balance of my time to close.

Mr. Chairman, I oppose H.R. 3564, which harms middle-class home buyers and their ability to access homeownership on fair and affordable terms.

This bill responds to a misinformation campaign, again initiated by a friend of the Republicans, FOX News, and propagated by extreme MAGA Republicans. It protects wealthy home buyers and imposes billions in new fees on all home buyers.

Mr. Chair, I also oppose this bill because it completely ignores our Nation's worsening housing crisis, which is locking millions out of the dream of homeownership. MAGA Republicans are instead focused on a minuscule fee in the home-buying process that does nothing to address our Nation's housing shortage and rising housing costs that are driving inflation.

We have a shortage of 14 million homes nationwide and more than 582,500 people experiencing homelessness on any given night, with homelessness rising faster in rural communities than anywhere else in the country. Meanwhile, U.S. renters are paying more of their income on rent today than ever before. These are the real problems that Republicans should be working to solve, not increasing fees by billions of dollars according to the CBO.

In fact, this bill is opposed by Americans for Financial Reform, Center for Responsible Lending, the National Fair Housing Alliance, the National Housing Law Project, and the National Housing Resource Center. Industry groups such as the Mortgage Bankers Association and the National Association of Realtors are also very concerned about this.

Republicans are forever worried about the fact that we are not making enough cuts. Yet, in the negotiations that just occurred on raising the debt limit, they wanted to cut, cut, cut, cut. They are not only jeopardizing middle-class homeowners, but they are increasing the amount of money--more than even needed--than the Congressional Budget Office has said the bill would cost.

Why $5 billion? I don't get it. I don't understand, but I am through with it.

Mr. Chair, I simply ask for a ``no'' vote on this bill, and I yield back the balance of my time.

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Ms. WATERS. Mr. Chair, I claim the time in opposition.

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Ms. WATERS. Mr. Chair, I yield myself such time as I may consume.

Well, actually, I don't even want to waste another minute on this pointless and redundant amendment.

Anyone who pays attention to government oversight knows that the GAO already makes all of its reports resulting from legislative mandates publicly available on the GAO's website as soon as they are issued to Congress.

Mr. Chair, I include in the Record two letters: one from Americans for Financial Reform and one from Public Citizen. Americans for Financial Reform, May 23, 2023. Hon. Patrick McHenry, Chairman, House Committee on Financial Service, Washington, DC. Hon. Maxine Waters, Ranking Member, House Committee on Financial Services, Washington, DC.

Dear Chairman McHenry and Ranking Member Waters: We are writing to express our opposition to H.R. 3564 ``Middle Class Borrower Protection Act of 2023.'' The bill's title is ironic because it would, in fact, make mortgages more expensive for many middle-class American families.

Record housing prices have put homeownership increasingly out of reach for my Americans. The US median home sales price is $436,800 as of the first quarter of 2023. That's a 32 percent increase from 2020, when the median was $329,000. However, Americans have not become 32 percent richer in the last three years. Rather, inflation, rising demand, and the increasing amount of homes owned by private equity and Wall Street firms have all contributed to these price increases. Meanwhile, rising rents make it increasingly difficult for first-time home buyers to save for a down payment. To afford a 20 percent down payment on a $436,800 home, a homebuyer would need $87,360 for the down payment, a sum that many middle-income American families simply do not have.

Given these trends, the FHFA should be commended for making mortgages more affordable for first-time homebuyers, borrowers participating in the Enterprises' affordable mortgage programs, and creditworthy borrowers who lack a 20 percent down payment. These borrowers will see reduced or eliminated loan level price adjustment fees. The FHFA will also increase loan level price adjustment fees for vacation home and investment property mortgages, cash-out refinances, and large loan amounts. Taken together, these actions demonstrate an important first step towards a more equitable mortgage pricing framework that supports middle class homebuyers over investors and second-home owners.

We oppose H.R. 3564 because it would rescind the FHFA's more equitable pricing framework and instead require the FHFA to increase fees for many first-time home buyers and those who do not have a 20 percent down payment. It would require the FHFA to impose a risk-based pricing model, one that would ultimately benefit housing investors and vacation home owners while making homeownership more difficult for middle class Americans.

H.R. 3564 will disproportionately harm homebuyers of color. Because of our history of racial discrimination, a large racial wealth gap persists that makes it less likely that a homebuyer of color will be able to pay for a 20 percent down payment through their personal savings, assistance from their families, or inheritance.

Opponents of the FHFA's pricing matrix have spread significant misinformation about its impacts on mortgage pricing. To be clear: under the new framework, borrowers with good credit and higher down payments will continue to pay lower mortgage costs than borrowers with good credit and lower down payments, because these borrowers will still be required to pay for monthly mortgage insurance until they reach 20 percent equity.

Optimally, Americans for Financial Reform believes the loan-level price adjustment fees should be eliminated altogether because this will increase pricing transparency and make homeownership more affordable. These fees are unnecessary from a risk-mitigation perspective because Fannie Mae and Freddie Mac already have charge guarantee fees to cover the credit risk of acquiring single-family loans from lenders. However, the changes recently made by FHFA are a step in the right direction of mitigating the adverse effects of the adjustment fees, which is why we support FHFA's actions. H.R. 3564 would move us in the wrong direction by further entrenching the loan-level price adjustment fee flawed framework and making it even more inequitable.

At a time when more and more Americans are struggling with the cost of housing, it defies comprehension that Congress would seek to increase fees for middle class homebuyers. For these reasons, we urge you to oppose this legislation. Sincerely, Americans for Financial Reform. ____ Public Citizen 50, May 22, 2023 Chair Patrick McHenry, Ranking Member Maxine Waters, Hon. Members of the Committee, House Committee on Financial Services, Washington, DC.

Dear Chair McHenry, Ranking Member Waters and Members of the Committee: On behalf of more than 500,000 members and supporters of Public Citizen, we offer the following comment on legislation slated for a vote May 24, 2023, before the House Financial Services Committee. We address these bills in three parts. The first part involves a cluster of capital formation bills. The second part is a bill with multiple titles that purports to respond to the recent bank failures. The third part is a housing bill. 1. Capital Formation

The first cluster of bills involves capital formation. Average investors enjoy an ample range of opportunities for savings and wealth creation, and one of the most approachable is the public securities markets. There are thousands of public companies that offer stocks and bonds. Each of these public companies provide detailed disclosures on an annual (10k) or quarterly (10Q) basis, and sometimes more frequently (8k) following a major event that could affect the stock price. These documents are reviewed by the Securities and Exchange Commission (SEC) after they are subject to an independent audit. Most of these documents are studied by Wall Street analysts who publish critical information that an ordinary reader might miss. Investors may also choose a mutual fund, where experts select a portfolio of stocks, usually involving a certain risk appetite, or sector. Or, given that stock-picking can be difficult for even the most seasoned professional, investors may essentially choose ``all'' stocks through an index fund. Again, these investments are subject to rigorous registration and disclosure, with non-complying brokers subject to fines and expulsion from the industry for shoddy sales practices.

Then there are investment opportunities that fail to meet these standards. That's often because the underlying business is untested, or perhaps even shady. Sophisticated investors know to avoid them. But Wall Street salesmen want to earn commissions, and even selling such eschewed junk can generate those commissions. What prevents them are safeguards that Congress and the SEC have erected to deter the unscrupulous from pawning off the odious to unsuspecting victims.

The following cluster of bills are part of a years-long effort by Republican and some Democratic enablers to strip away some of those safeguards. The Increasing Investor Opportunities Act

This misleadingly titled bill would expose investors to greater risk by increasing the limit that a closed-end fund can invest in a private fund, which are subject to less regulation and disclosure. Currently, the SEC caps the amount that closed-end funds can invest in private funds at 15 percent of net assets, if the closed-end fund is sold to non- accredited investors, who are investors with lower income and total wealth. If a closed-end fund has more than 15 percent of net assets in private funds, it must sell that fund only to accredited investors. This bill would allow closed-end funds to invest 100 percent of their net assets in private funds and still be sold to non-accredited investors. Many private funds are simply bad products that sophisticated investors have avoided. This bill would allow them to be sloughed off on those with less investment experience and less income and savings to lose. We oppose this bill. The Retirement Fairness for Charities and Educational Institutions Act of 2023

This bill claims to level the playing field between 401(k) plans and 403(b) plans so that both accounts can invest in collective investment trusts (CITs). However, the bill would gut securities laws and allow securities salespeople to sell other, far riskier investments, to 403(b) plans. A 403(b) plan is one that is available to public school organizations.

Securities laws require that mutual funds and variable annuities that are sold to 403(b) plans must be registered with the SEC. Registration requires the disclosure of basic information such as risks and costs. The SEC reviews this for accuracy. This helps investors avoid products that are unfit for a risk-averse portfolio.

This bill would allow unregistered variable annuities and other pooled investment vehicles to be sold to these public- school teachers. The bill does this by amending the Investment Company Act and the Securities Act. This would end the disclosures about risks and costs. We believe this bill is a craven effort to expose hard-working public-sector workers to investment vehicles that can't be sold to people paying attention to important details. We oppose this bill. The Access to Small Business Investor Capital Act

This bill would allow business development companies (BDCs) to obscure critical information such as acquisition costs and other expenses (acquired fund fees and expenses, or AFFEs). Instead of highlighting them, sales documents could bury this information in a footnote to the fee table. This will be confusing if not misleading. We oppose this bill. The Helping Angels Lead Our Startups Act

This bill would allow firms to promote risky investments at various forums such as social clubs or college events without providing basic disclosures regarding the securities. The bill also prevents the SEC from offering any restrictions on these quasi sales events. We oppose this bill. A bill to except quotations of Rule 144A fixed-income securities from certain regulatory requirements

This bill would end the prohibition on publishing certain riskier securities (governed under Rule 144Af and Rule 15c2- 1) from using a quotation medium other than a national securities exchange (such as over-the-counter securities). The SEC did provide an exemption from this prohibition, but it was time limited. This would make the exemption permanent. We opposed the original exemption, and we oppose making it permanent and therefore we oppose this bill. 2. Response to Recent Bank Failures

The next bill is an amalgam of irrelevant, wrongheaded responses to the recent failure of three large regional banks. This legislation masks the Republican (and wayward Democratic) sponsorship of a major deregulation effort approved in 2018 known as S. 2155. S. 2155 led to the failures of Silicon Valley Bank and Signature Bank. S. 2155 increased from $50 billion to $250 billion the size of bank that would face ``enhanced supervision'' (as provided under Title I, Section 165 of the Dodd Frank Wall Street Reform and Consumer Protection Act). Enhanced supervision includes regular, frequent stress tests. Tellingly, Silicon Valley Bank (SVB) promptly grew from just under $50 billion in assets before approval of President Trump's S. 2155, to $211 billion by the end of 2022. It was not due for another stress test until 2024. When the Federal Reserve raised interest rates precipitously and after persistent, vocal warning to markets, SVB's lazy strategy of holding copious long term, low interest baring Treasury securities proved fatal. It collapsed March 10, 2023, a billboard for the disastrous deregulatory policy of S. 2155. Rather than acknowledge accountability, Republicans have projected their culpability by complaining that regulators failed; some even blame ``woke'' capitalism, as SVB devoted some attention to diversity and inclusion. The Increasing Financial Regulatory Accountability and Transparency Act

Title I of this bill would complicate the FDIC's resolution process for failing banks by requiring new and extensive analyses of the systemic risk exception. While we believe this exception should be used with great caution, the bar is currently high: at least two-thirds of the board members of the FDIC and Federal Reserve must support it, and it must be signed by the Treasury Secretary who must consult with the President. We oppose this title.

Title II would revise the Fed's emergency lending authority with several limitations that would slow down the ability to deploy stabilization tools. There are already a number of limits, the recent failure of three large banks does not make a case for such additional limitations. Instead, Congress should amend the statute (12 USC 1828 13c) that includes an exception to a bank controlling more than 10 percent of the nation's deposits (as JP Morgan does) acquiring another bank, namely if that bank is failing. The statute should authorize the FDIC to accept a second-best bid if from a bank with less than 10 percent of deposits. In its current form, we do not support Title II.

Title III would add another voting member to the Financial Stability Oversight Council (FSOC) and eliminate FSOC's Climate-related Financial Risk Advisory Committee. Given that climate change is the gravest threat to humanity (which is bad for business), Congress should improve oversight rather than reduce it, especially since the recent calamity was caused by simple failure to understand interest rate maturity mismatches, hardly the gravity of climate change. We oppose this title.

Title IV is an ad hominem retort to Federal Reserve Vice Chair Michael Barr, who issued a report identifying S. 2155 as one of the factors causing the collapse of SVB. The bill would establish qualifications for Vice Chair that Barr does not meet. Legislating should be about policy, not personal attacks. We clearly oppose this title.

Title V would require the FDIC Chair, OCC Comptroller of the Currency, NCUA Chair, and the Fed's Vice Chair of Supervision to testify before Congress on a semiannual basis (currently, only the Fed Vice Chair of Supervision is required to testified semiannually). This is the only title of the bill Public Citizen does not oppose. We oppose all the other titles, and this bill. 3. Housing bill The Middle-Class Borrower Protection Act

This bill would stymie the ability of Freddie Mac and Fannie Mae (overseen by the Federal Housing Finance Agency) to appropriately price credit risk. It would compromise the safety and soundness of the housing finance market. We oppose this bill.

Once again, the committee majority are doing Wall Street's bidding by bringing a counterproductive mark-up of deregulatory bills instead of increasing the safety and soundness of our financial system. Responsible lawmakers concerned about investor protection, financial stability and housing must not support this legislation. Sincerely, Public Citizen.
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Ms. WATERS. Mr. Chair, I yield myself the balance of my time to close.

Mr. Chair, I include in the Record letters of opposition to H.R. 3564 from the Center for Responsible Lending, the National Housing Resource Center, the National Housing Law Project, and the National Fair Housing Alliance. [From the Center for Responsible Lending, Sept. 2020] More Harm and No Good--So-Called ``Middle Class Borrower Protection Act of 2023'' Leaves Borrowers and Taxpayers Less Financially Secure

The Center for Responsible Lending OPPOSES H.R. 3654, the so-called ``Middle Class Borrower Protection Act of 2023,'' and urges Members of Congress to do the same. As written, the bill would: (1) undo the Federal Housing Finance Agency's recent cost changes for mortgages under the loan-level- pricing-adjustment framework used by Fannie Mae and Freddie Mac and (2) subject any future framework changes to the Administrative Procedure Act. Yet. rather than protecting America's middle class, these proposals would make it more expensive for middle-class consumers to become homeowners using conventional mortgage loans and more difficult for many consumers to enter America's middle class by obtaining affordable, conventional mortgage credit. Here is what policymakers, advocates, and consumers need to know:

(1) H.R. 3654 Undermines Middle Class Borrowers By Undoing The Pricing Reductions That Were Recently Made For Them. This bill would eliminate the reductions in loan-level-pricing adjustments (LLPAs) that the Federal Housing Finance Agency (FHFA) recently established. Those reductions were targeted to the lower wealth, credit-worthy borrowers who disproportionately make up or seek to enter America's middle class.

(2) H.R. 3654 Makes it Harder for More Americans to Enter the Middle Class by Raising the Cost of a Conventional Home Loan for First-Time And Working-Class Borrowers. Homeownership continues to be the single most important factor in determining the ability of an American household to build wealth and enter or maintain middle-class status. Yet, by eliminating the pricing reductions FHFA recently implemented for lower-wealth and first-time homebuyers, the proposed bill reinforces a two-tier housing finance system where the conventional mortgage market continues to prioritize wealthier borrowers while first-time, underserved or rural borrowers with less wealth are dependent upon government-backed loans from federal agencies. That result is inconsistent with the statutory purpose and mandate of Fannie Mae and Freddie Mac. As the FHFA has noted, ``[a]chieving a liquid, resilient housing finance market throughout the country requires improved access to responsible mortgage credit across different market segments of creditworthy borrowers.

(3) H.R. 3654 Makes All Taxpayers More Vulnerable by Disrupting Safety And Soundness Regulation of for Fannie Mae and Freddie Mac. In the aftermath of the Great Recession, the Financial Crisis Inquiry Commission stated unequivocally that the primary cause of the crisis was a failure on the part of the government to regulate the financial industry, particularly in the secondary mortgage market. Based on its own experience in that regard, Congress created an independent FHFA, empowered it to assume conservator responsibilities for Fannie Mae and Freddie Mac, and ensured that it would have the ability to act swiftly and independently from the political process to manage each government-sponsored enterprise's safety and soundness considerations. Under H.R. 3654, FHFA would Jose the ability to act swiftly on pricing considerations tied to safety and soundness by being subjected to the Administrative Procedure Act. That result would require the Agency to delay implementation of pricing changes for an extended period that often does not match changing dynamics in the financial markets. As a result, taxpayers would be a greater risk for, once again, having to bail out the enterprises.

@ Making homeownership more expensive for moderate income borrowers and less accessible for first-time, workingclass, rural and other underserved borrowers is not protecting America's middle class. Likewise, depriving the enterprises' conservator of the tools needed to swiftly respond to safety and soundness considerations raised by pricing and, in the process, increasing the likelihood of another taxpayer funded bail out is not protecting American taxpayers. For each of these reasons, H.R. 3654, the ``Middle Class Borrower Protection Act of 2023,'' is bad public policy and should not be enacted. CRL urges Members of Congress to vote against the measure. ____ May 21, 2023. Hon. Patrick McHenry, Chairman, U.S. House Financial Services Committee, Washington, DC. Hon. Maxine Waters, Ranking Member, U.S. House Financial Services Committee, Washington, DC. Subject: The Current Mortgage Market: Undermining Housing Affordability with Politics

We are writing to show support for the Federal Housing Finance Agency (FHFA) changes to the Loan Level Price Adjustments (LLPAs). The past LLPA pricing framework unfairly raised the costs for many first-time homebuyers who had downpayments of less than 20 percent. The main area of growth for first time homebuyers will be people of color and this disproportionately disadvantages them. The median downpayment in 2021 was 17 percent and for first-time- homebuyers it was 7 percent. These homebuyers with lower downpayments will also be paying mortgage insurance which mitigates the risk to the Enterprises and raises the costs for the homebuyer.

Reducing the LLPA fees for first-time homebuyers and participants in the affordable housing programs also helps the Enterprises meet their mission goal of supporting homeownership in America. Ironically, the LLPA framework was instituted in 2009 in response to the financial crisis and has unfairly put the burden of the Enterprises' financial recovery and future catastrophic risk on first-time- homebuyers and especially borrowers of color, despite their communities being the greatest victims of the financial crisis.

We believe the solution is eliminating the LLPAs altogether. Unnecessary LLPA fees raise the cost of homeownership and reduce opportunities for Americans who would like to become homeowners. Our organization urges you to prioritize fair and inclusive mortgage pricing to promote equitable and sustainable homeownership. Signed, National Housing Resource Center. ____ National Housing Law Project, June 22, 2023. Hon. Kevin McCarthy, Speaker of the House of Representatives. Hon. Patrick McHenry, Chair, House Financial Services Committee. Hon. Hakeem Jeffries, Minority Leader of the House of Representatives. Hon. Maxine Waters, Ranking Member, House Financial Services Committee.

Dear Speaker McCarthy, Leader Jeffries, Chair McHenry, and Ranking Member Waters: The National Housing Law Project writes to express our strong opposition to H.R. 3564, the so- called ``Middle Class Borrower Protection Act of 2023''.

H.R. 3564 would repeal the structure of upfront fees related to residential mortgages developed by the Federal Finance Housing Agency (FHFA) and instituted by the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, on May 1, 2023, and reinstate the prior fee structure. It would also prohibit any changes to the fee structure for at least two more years.

Contrary to the claims of H.R. 3564's cosponsors, the FHFA's updated fee structure does not uniformly shift the cost of lower fees for borrowers with low credit scores to those with high credit scores. Instead, it represents a carefully calibrated effort to balance risk to the GSEs' balance sheets with their obligation to provide broad and equitable access to homeownership in light of the realities of the housing market.

As explained in a May 23, 2023, letter opposing H.R. 3564 from Americans for Financial Reform (AFR), the updated fee structure that the bill would rescind serves to make the homebuying market more equitable than it has been historically by lowering mortgage costs for first-time and first-generation homebuyers who are disproportionately people of color. Moreover, reverting to the prior fee structure would actually harm the many middle-income families around the country who have never owned a home and who are unable to save for a large down payment by restoring higher upfront fees for their loans.4 H.R. 3564 is the epitome of bad policy: a misleadingly named bill that seeks to erase 18 months of careful work by the government's own experts in housing finance for the sole purpose of ratcheting up political controversy. We urge you to oppose this legislation. Sincerely, Lisa Sitkin, Supervising Attorney. ____ [May 22, 2023] NFHA Issues Statement Opposing the Middle Class Borrower Protection Act

Washington, D.C.--Nikitra Bailey, Executive Vice President of the National Fair Housing Alliance (NFHA), issued the following statement opposing the Middle Class Borrower Protection Act of 2023 introduced by Rep. Warren Davidson (R- OH). The bill would require the Federal Housing Finance Agency to reverse recent changes to its single-family pricing matrix for Fannie Mae and Freddie Mac.

``We are concerned that Congress is attempting to set mortgage pricing fees for loans purchased by the Government Sponsored Enterprises (GSEs). This is the role of their regulator, the Federal Housing Finance Agency (FHFA). A return to the former pricing matrix would raise the cost of homeownership and make it more expensive for first-time homebuyers and borrowers of color seeking conventional loans. The bill also fails to advance housing affordability and does not offer a solution for the millions of mortgage-ready consumers who desire and can succeed in homeownership.

``Prior to FHFA mandating upfront Loan Level Price Adjustment (LLPA) fees, the GSEs had a stronger track record of purchasing loans made to Black, Latino, AAPI, and Native communities. Since FHFA instituted LLPAs in 2008, the GSEs have grossly underserved the very borrowers on whom the health of the future housing finance system depends. LLPAs also unfairly place the potential burden of future catastrophic risk on the backs of the borrowers who were most harmed by the Great Recession.

``LLPAs must be eliminated. They force creditworthy first- time homebuyers and borrowers of color to pay more for mortgages, which prices them out of the conventional market. The GSEs' charters mandate that they serve the whole of the market--not just wealthier borrowers purchasing second homes and investors. FHFA's recent changes move the system toward greater safety and soundness, which is ultimately in everyone's best interest.''

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Ms. WATERS. Mr. Chair, these organizations all fight hard for homeownership, especially for middle-class Americans. They are absolutely opposed to this bill.

Again, I don't understand why we are spending time on this amendment. It does not accomplish anything at all. It would require GAO to do something it already does.

Mr. Chair, I yield back the balance of my time.

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Ms. WATERS. Mr. Chair, I rise in support of Ms. Pettersen's amendment which is simply holding Republicans accountable for their claims about the impacts of the bill.

They claim that this bill will help middle-class home buyers, so I don't see why there should be any objection to this amendment which would make the implementation of the bill contingent on the truth of its claims.

Republicans held hearings on this topic where their own witnesses repeatedly debunked MAGA Republicans' claims that these changes would result in higher credit score borrowers paying higher mortgage fees than lower credit borrowers.

If we agree that the goal of this bill is to help middle-class borrowers, then I think we should be able to agree on this amendment.

Mr. Chair, I urge Members to support this amendment.

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