Washington Watch

House Committee pushes back on Robin Hood mortgages; Tlaib supports them

Biden regulations force low-risk borrowers to subsidize high-risk borrowers

A U.S. House committee last week approved a bill that would halt Biden adminstration regulations that raise mortgage costs for low-risk borrowers and lower them for high-risk borrowers.

The Middle Class Borrower Protection Act of 2023 was submitted May 22 by Rep. Warren Davidson, R-Ohio.

Two days later the House Financial Services Committee approved the bill in a 26-22 vote. According to the committee explainer, the bill, if enacted into law:

...would repeal the recently enacted Loan Level Pricing Adjustments (LLPA) fee increases and reinstate the LLPA fee structure in effect prior to May 1, 2023. It would also institute a temporary LLPA fee change freeze pending a (Government Accountability Office) review.

Related reading: Biden’s Robin Hood mortgages would punish high credit scores

The loan level price adjustment is tacked onto each borrower’s mortgage. Loan level price adjustments for borrowers with credit scores between 760 and 779, and paying a 15% to 20% down payment, are 0.625% under the Biden policy, compared to 0.25% before.

For borrowers with credit scores between 640 and 659, and paying a 15% to 20% down payment, loan level price adjustments would fall to 2.25%, down from 2.75% before.

“Low-risk borrowers may subsidize some of the costs to insure against the default risk of borrowers with low credit scores,” read a May 12 report from the Congressional Research Service.

The Midde Class Borrower Protection Act would restore the previous rates.

Michigan has two representatives on the Financial Services Committee. They took opposite sides on the bill.

Among the 26 yes votes was Bill Huizenga, R-Zeeland. Among the 22 no votes was Rashida Tlaib, D-Dearborn. See the roll call vote here.

The bill would need to pass the House and Senate in identical forms, then be signed by President Joe Biden, to enact into law.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.