NAMB Openly Endorses Plan To Restore Former LLPA Framework

Mortgage News June 19, 2023

This week, the National Association of Mortgage Brokers (NAMB) announced its endorsement of a bill put forward by Republicans in the U.S. House of Representatives. The proposed legislation aims to restore the Loan Level Price Adjustment (LLPA) framework that was effective until May 1, 2023.

Earlier in April, lawmakers introduced a similar bill, but it had narrower objectives. It sought to nullify the modifications announced in January and maintain risk-based pricing.

The revised proposal aims to limit the Federal Housing Finance Agency (FHFA) from making adjustments to the pricing structure specifically for single-family homes. Additionally, it seeks to prevent changes to the Loan Level Price Adjustment (LLPA) based on the debt-to-income ratio.

If the bill is approved, it would also require the Government Accountability Office (GAO) to conduct a comprehensive study on the FHFA’s modifications to the standard single-family pricing framework under the recalibrated single-family pricing framework. The study would analyze the reasons behind these revisions, the inputs provided by the Government-Sponsored Enterprises (GSEs), and the extent to which the proposed revisions align with the Enterprise Regulatory Capital Framework.

The initial edition of the bill was approved by the House Financial Services Committee in May. Nevertheless, NAMB noted that the approval followed a partisan division, indicating an ideological divide between political parties on the matter.

When the proposed Loan Level Price Adjustment (LLPA) changes were first announced this year, they generated significant controversy. The primary concern centered around the perception that these changes would penalize borrowers with strong credit histories. FHFA Director Sandra Thompson, however, characterized this belief as a misconception.

Subsequently, the changes were reversed, although not without House Republican lawmakers seizing the opportunity to criticize them in a House Financial Services subcommittee hearing. Another hearing was conducted with Sandra Thompson as a witness.

The current bill in the House is sponsored by Representative Warren Davidson, a Republican from Ohio. Currently, there are 13 Republican cosponsors for the bill, while no Democrats have signed on as cosponsors as of June 8. On June 7, an amendment to the proposed bill was approved by the committee.

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