What Is the Free Market Mortgage Act of 2023?

While not officially titled the Free Market Mortgage Act of 2023, H.R. 2876 was introduced with the intent to cancel a fee structure proposed by the Federal Housing Finance Agency (FHFA) in January 2023 and set for implementation on May 1, 2023.

The bill, officially titled "To cancel certain proposed changes to loan level price adjustments by the Federal National Mortgage Association and credit fees charged by the Federal Home Loan Mortgage Corporation," was introduced by Representative Stephanie Bice (R-OK) on April 26, 2023. It was referred to the House Committee on Financial Services but never proceeded out of committee.

A similar bill, H.R. 3564, the Middle Class Borrower Protection Act of 2023, was introduced on May 22, 2023, and eventually passed the House, although it didn't make it past the Senate.

Understanding the Free Mꦜarket🀅 Mortgage Act of 2023

Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that facilitate homeownership by guaranteeing 澳洲幸运5开奖号码历史查询:mortgages as we🌞ll as buyi♛ng and servicing those made by other lenders.

In 2008, as a response to the financial crisis, 澳洲幸运5开奖号码历史查询:loan-level price adjustment♍s (LLPAs) were added to help bring government-backed loan fees in line with borrowers' risk profiles. These fees vary based on different loan traits, including the size of the down payment and the borrower's 澳洲幸运5开奖号码历史查询:credit score.

In 2021, FHFA director Sandra Thompson launched a review of these fees. The result was an updated fee framework introduced in January 2023 and designed to go into effect on May 1, 2023.

When the new framework was released, critics pointed out that, in some circumstances, fees would increase for those with higher cre𒉰dit scores, while fees would potentia𒁃lly decrease for those with lower credit scores.

In response to these concerns, Rep. Bice introduced the Free Market Mortgage Act of 2023 to cancel the changes. However, after being referred to a House committee, it didn't proceed any further.

Key Provisions of the Fre🐲e Market🦹 Mortgage Act of 2023

The only provision of the Free Market Mortgage Act of 2023 was to cancel the implementation of the new upfront fee framework applied to GSE loans.

Similarly, the Middle Class Borrower Protection Act of 2023 also aimed to cancel these fees. This legislation went a step further, though, as it would've restricted the types of adjustments the FHFA can make to fees and temporarily restricted the change in fees.

Criticism and Support

Supporters of the Free Market Mortgage Act of 2023 took issue with the new framework because it appeared to penalize those with higher credit scores with larger fees than those with lower credit scores. Others suggested that the new structure doesn't accurately address borrower risk profiles.

Critics of the Free Market Mortgage Act of 2023 pointed out that the legislation was proposed in response to inaccurate and incomplete representations of the new framework. FHFA director Thompson said that, overall, fees increased as credit scores decreased.

Others noted that, regardless of the new framework, borrowers with higher credit scores could still get a better mortgage cost deal.

The Bottom Line

While the Free Market Mortgage Act of 2023 didn't go any further than the House, it did prompt more discussion about the changes to the FHFA fee framework related to GSEs Fannie Mae and Freddie Mac. It remains to be seen whether additional legislation will be proposed related to the new fee structure.