Fannie Mae and Freddie Mac, the government-backed mortgage
finance companies, want to bump up mortgage fees in New Jersey and
four other states where it's more expensive to foreclose on a home.
The Federal Housing Finance Agency, which oversees Fannie and Freddie, on Thursday proposed the higher fees for lenders writing mortgages in New York, Connecticut, Florida and Illinois, as well as New Jersey, saying that "state laws and practices can have a significant impact on loan default costs."
In New Jersey, it takes more than two years to obtain title to a home after a homeowner defaults on a mortgage, and during that time, higher property taxes and other expenses push up the total cost for Fannie and Freddie, the FHFA said. New Jersey lenders would pay an extra fee of 0.2 percent; the extra fees range from 0.15 percent in Illinois to 0.3 percent in New York.
"The loss to investors can be much more severe" in states like these, where foreclosures go through the courts, said Keith Gumbinger of HSH.com, a Pompton Plains publisher of mortgage information.
The FHFA has increased these so-called guarantee fees nationwide several times since 2008, as more homeowners defaulted on their loans.
The fees are charged to lenders who sell their loans to Fannie and Freddie, but would be passed through to borrowers in the form of higher interest rates. FHFA estimated the cost at $3.50 to $7 more a month for buyers with a $200,000, 30-year mortgage in the five states. An estimate for New Jersey alone was not available.
Sen. Bob Menendez, D-N.J., criticized the proposal Thursday.
"It's outrageous that after banks preyed on homeowners with subprime loans and improper foreclosures, FHFA now wants to penalize homeowners in states that have strong consumer protections to stop banks from wrongfully foreclosing," said Menendez, who is chairman of the housing subcommittee of the Senate Banking Committee.
"Responsible new homeowners shouldn't have to pay more because poor foreclosure procedures by banks have led courts to delay or stop foreclosures on older loans."
The FHFA made the proposal public Thursday and, after allowing 60 days for public comment, expects to implement the higher fees in 2013.
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