Federal Housing Finance Agency Director Sandra Thompson sought to clarify in a statement issued late Tuesday that the government-sponsored enterprises'
"The changes to the pricing framework were not designed to stimulate mortgage demand," said the head of the agency, which oversees two agencies that back a significant number of home loans in the U.S. market.
"The fees associated with a borrower's credit score and down payment will now be better aligned with the expected long-term financial performance of those mortgages relative to their risks," she added.
The statement is aimed at addressing "a fundamental misunderstanding about the fees charged by the enterprises and why they were updated," Thompson said.
She issued it after reading several recent missives critical of the new loan-level price adjustments, which are used to subtract certain fees from amounts the GSEs pay lenders for loans when specific characteristics are present.
Some critics, like Rep. Patrick McHenry, R-N.C., and Rep. Warren Davidson, R-Ohio, recently opposed the new pricing grids on the grounds that they "cannot be justified from a risk management perspective and amount to a tax on all creditworthy GSE homebuyers to subsidize borrowers with riskier loans."
"Your new LLPA structure only increases risks to the GSEs and taxpayers while compounding the existing economic uncertainty in our housing market," the congressmen said in a letter they sent to Thompson on Tuesday. McHenry chairs the House Committee on Financial Services. Davidson chairs the Subcommittee on Housing and Insurance.
Thompson pushed back on such assertions in her statement, noting that while price cuts for lower-income borrowers "primarily are supported by fees on
"The enterprises' statutory charters specifically include references to supporting low- and moderate-income families by earning returns on mortgages for these borrowers that may be less than the returns earned on other products," she said. "Indeed, Congress incorporated this into the enterprises' charters decades ago and it is a long-standing component of the enterprises' core business models."
She stressed that "the targeted elimination of fees" supports "borrowers with lower incomes — not lower credit scores."
Thompson said some of the broad characterizations of the fee changes by critics miss the nuance in the new grids that GSEs Fannie Mae and Freddie Mac use to price mortgages lenders sell to them, which have been in need of modernization in line with current risks.
Typically, if borrowers are given leeway in a category such as income requirements, they'll need to have strong indicators of an ability to repay in other areas to receive a price break, she said.
"Some updated fees are higher and some are lower, in differing amounts. They do not represent pure decreases for high-risk borrowers or pure increases for low-risk borrowers. Many borrowers with high credit scores or large down payments will see their fees decrease or remain flat," she said.
The broader context of loan expenses outside the LLPA also should be kept in mind when it comes to down payments in particular, Thompson said.
"The new framework does not provide incentives for a borrower to make a lower down payment to benefit from lower fees," she said. "Borrowers making a down payment smaller than 20% of the home's value typically pay mortgage insurance premiums, so these must be added to the fees charged by the enterprises when considering a borrower's total costs."
