Republican Reps. Patrick McHenry and Warren Davidson sent a letter on Tuesday promising action if the Biden administration did not reverse changes that increase mortgage costs for homeowners with good credit to offset those who have riskier credit.
Financial Services Chair McHenry, R-N.C., and Housing and Insurance subcommittee chair Davidson, R-Ohio, said they would move to repeal the new provision through legislation if the Federal Housing Finance Agency did not move to do so itself.
'It's a socialist redistribution of wealth,' said Davidson in a statement. 'If the FHFA doesn't reverse this rule, Congress must.'
'These changes violate the fundamental principle of risk-based pricing, namely that lower-risk borrowers should pay lower prices for access to credit than higher-risk borrowers,' the two chairs wrote in their letter, addressed to FHFA director Sandra Thompson and obtained by DailyMail.com.
'This new tax also fails the basic test of fairness by punishing borrowers who act responsibly, and will in turn incentivize homebuyers to reduce their down payments and carry additional debt.'
When an individual takes out a mortgage the rate they pay is determined by both interest rates set by the Federal Reserve and the loan-level price adjustment. The loan-level price adjustment functions like car insurance going up after an accident - the riskier the borrower, i.e. those with bad credit, the more they pay.