The Federal Housing Finance Agency (FHFA) is pursuing a proposal that calls for higher fees on Illinois homeowners on their new mortgages in the state.
The Federal Housing Finance Agency oversees Fannie Mae and Freddie Mac. Attorney General Lisa Madigan sent a letter to Edward J. DeMarco, acting director of the FHFA in which she asked the agency to abandon this proposal. The higher fees proposal will affect Illinois, Connecticut, Florida, New Jersey and New York. The FHFA claims the fees are necessary because these states enacted additional legal protections for borrowers to help fight off foreclosure. Fannie Mae and Freddie Mac claim that this translates into higher fees for them when they have to carry out a foreclosure.
Madigan along with other attorneys general argue that the legal protections enacted are crucial protections for homeowners either facing or going through foreclosure. Madison also argues that the FHFA’s proposal ignores the fact that lender and mortgage servicer misconduct is a major factor in the rising costs to borrowers that is also passed on to Fannie Mae and Freddie Mac in many situations. These statutory consumer protections are not the main factor in higher foreclosure costs for Fannie Mae and Freddie Mac argues Madigan.
This is viewed by some as simply a threat to compel these states to accept higher costs for borrowers In their states or eliminate many of the legal protections afforded borrowers altogether.
This is certain to garner attention as the proposal gains steam. Historically low interest rates have helped revive the housing market in many parts of the United States. Low rates combined with a decrease in the number of foreclosed properties available for purchase continues to encourage individuals to pursue home ownership. The lower number of foreclosed properties and the drop in the Foreclosure Discount encourages buyers to purchase homes because they feel that the market is improving and the chance of their property dropping in value has decreased.
Mortgage companies garnered a lot of attention as they faced lawsuits over their misconduct in dealing with borrowers. Potential borrowers see these companies facing stiff penalties and huge legal settlements and this creates a feeling that the mortgage industry is under control. Plus, states like Illinois have enacted statutes protecting borrowers in the foreclosure process. It has become a lengthier and more difficult process to foreclose on a homeowner and seize their property due to new legislation.
It appears based on Attorney General Madigan’s argument that Fannie Mae and Freddie Mac are simply trying to pass the higher costs on to the consumers without fully examining the causes behind the increase in the cost of doing business. If the proposal is approved and implemented, Illinois homebuyers will most likely feel the effect through higher interest rates. The other option Madigan sees is to eliminate some of the legal protections for borrowers. The cost of borrowing would be lower, but homeowners would lose some of the protections that guard homeowners against abusive or unlawful foreclosure practices.
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