House rescinds Biden mortgage rule.

The House Votes to Revoke FHFA Rule, Sparks Debate on Credit Scores and Homeownership

The House of Representatives has approved a measure to revoke a Federal Housing Finance Agency (FHFA) rule that has sparked controversy among Republicans. The rule, implemented by the Biden administration, aimed to make homeownership more accessible for lower-income buyers and those with lower credit scores. However, Republicans argue that the rule is flawed and could result in higher fees for individuals with better credit scores.

The vote, which took place on Friday, resulted in a 230-189 majority in favor of scrapping the rule. Surprisingly, 14 Democrats joined the GOP majority in supporting the measure. The FHFA rule, effective since May 1, adjusted the loan-level price adjustment fee charged by mortgage giants Fannie Mae and Freddie Mac based on a person’s credit score and down payment.

Republicans Argue Against the Rule’s Impact on Credit Scores

Representative Warren Davidson (R-OH), the author of the legislation, expressed concerns about the rule’s impact on credit scores. He criticized the rule for potentially penalizing lower-income buyers with good credit scores while benefiting wealthier buyers with lower credit scores but higher incomes. Davidson emphasized that the rule was not income-based, highlighting the potential for unintended consequences.

Davidson’s bill aims to undo the entire FHFA rule change and prevent the implementation of a debt-to-income ratio test in the future. The bill also calls for a study by the Government Accountability Office to examine the implications of the rule change.

Democrats Defend the Rule as a Means to Increase Housing Affordability

While Republicans have criticized the rule change, Democrats have defended it as a step towards increasing housing affordability. They argue that the current housing market, with rising home prices and mortgage rates, necessitates measures to level the playing field.

FHFA Director Sandra Thompson defended the rule change during her appearance before the House Financial Services Committee. She stated that the updated fees do not disproportionately burden higher-credit-score borrowers to benefit lower-credit-score borrowers. Thompson clarified that the fee adjustments vary based on credit scores and down payments, with some borrowers experiencing fee decreases or remaining unaffected.

The Future of the Bill and Congressional Oversight

Although Davidson’s bill passed the House, its future in the Senate remains uncertain due to the Democrats’ slight majority. Furthermore, if the bill reaches President Joe Biden’s desk, he is likely to veto it, as he did with a previous bill targeting a controversial Labor Department rule.

Republicans have been advocating for more congressional oversight over rulemaking and the administrative state. The recent passage of the Executive In Need of Scrutiny (REINS) Act in the House reflects this push for increased congressional power in the rulemaking process. The REINS Act would require congressional approval for every new “major rule” proposed by federal agencies.

Representative Kat Cammack (R-FL), the sponsor of the REINS Act, believes that both parties have weaponized the rulemaking process. She argues that the regulatory regime has become a de facto fourth branch of government. Cammack’s legislation aims to address this issue by granting Congress more authority in approving major rules.

Davidson, a supporter of Cammack’s legislation, believes that the FHFA rule would face closer scrutiny under her proposal. He sees the REINS Act as a necessary tool to ensure accountability and prevent the implementation of flawed rules.

As the debate continues, the fate of the FHFA rule and the broader issue of congressional oversight over rulemaking remain uncertain.

*As an Amazon Associate I earn from qualifying purchases