Whereas, The Federal Housing Finance Agency (FHFA) is responsible for the oversight and regulation of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), collectively known as the Enterprises. The Enterprises are charged with facilitating responsible access to mortgages, which they accomplish by guaranteeing borrowers’ mortgage payments, a practice that ultimately reduces interest rates on home loans. To cover the risk of borrowers defaulting on a mortgage, the Enterprises charge fees, including upfront fees that vary based on the borrower’s credit score and the down payment made on the loan; and
Whereas, On January 19, 2023, the FHFA announced changes to the upfront fees that the Enterprises charge on mortgages sought to finance the purchase of a home, effective May 1, 2023. Comparing the fee matrices of Freddie Mac before and after this change, two general trends are revealed. First, there were sharp decreases in upfront fees charged to those who make very small down payments of less than 5 percent of the value of the home. In some cases, these fees have decreased by as much as 2 percent. Second, these fees were redistributed, so that upfront fees generally increased for those with better credit scores and decreased for those with poorer credit scores. Paradoxically, those with strong demonstrated financial track records are punished with increased fees, while those with lower credit scores will now pay considerably less; and
Whereas, The May 2023 changes to the Enterprises’ upfront fees favor riskier borrowers at the expense of those who are more financially stable, a policy shift that could decrease the security and safety of the housing market. The FHFA should not adopt policies that diminish the incentives for responsible budgeting and long-term planning by those pursuing the dream of home ownership. Rather, the FHFA should honor the Enterprises’ mission to facilitate responsible access to mortgages by distributing fees in a way that appropriately incentivizes responsibility; and
Whereas, Increasing upfront mortgage fees for financially responsible homebuyers is actively harmful to many Michiganders. The housing market in Michigan is already highly competitive, with insufficient supply to meet demand, making it difficult for our residents to purchase homes, even after years of planning. As inflation eats away at Michiganders’ earnings and savings, hiking up the fees paid by many homebuyers has only exacerbated these economic hardships, adding to the worries of Michigan’s middle class; now, therefore, be it
Resolved by the Senate, That we strongly condemn the May 2023 changes to the upfront fees on home mortgages charged by Fannie Mae and Freddie Mac under the direction of the Federal Housing Finance Agency; and be it further
Resolved, That copies of this resolution be transmitted to the Director of the Federal Housing Finance Agency.
Co-sponsored by Sens.
Referred to the Committee on Housing and Human Services
