Florida's lengthy foreclosure process could mean higher fees for all federally backed mortgages if a proposal released Thursday is approved.
The plan by the Federal Housing Finance Agency would charge more for mortgages in states where it takes the longest time to repossess a home, including Connecticut, Florida, Illinois, New Jersey and New York.
The fee would be minimal -- about $42 to $84 per year on a traditional 30-year, $200,000 mortgage -- but it would offset the "exceptionally high costs" incurred when a mortgage goes into default in one the five states with extended foreclosure time lines.
Without the additional fee, states with shorter foreclosure periods "effectively subsidize borrowers in states" where it costs more to foreclose on a home, the agency said.
FHFA oversees Fannie Mae and Freddie Mac, which own or back 60 percent of all mortgages. Fannie Mae has about $173 billion in unpaid mortgage debt in Florida. Freddie Mac's Florida mortgage debt is $102 billion.
"Ultimately, I don't think it will make that much of a difference," said Scott Tennell, broker owner of Continental Capital Funding in Loxahatchee, about the fee. "If they don't do it through a rate adjustment, they'll do it some way else. One way or the other they are going to get the money."
Lenders charge additional fees on loans for various reasons, including whether the home will be occupied by the owner, the type of property and a borrower's credit rating.
According to the proposal, it takes an average of 396 days nationwide to foreclose on a home. In Florida, it takes 660 days.
Ray Premuroso, president of North Palm Beach-based Mortgage Resources of South Florida, said homeowners should have an option of paying the fee at closing, instead of stretching it out through the life of the loan with interest.
Either way, though, he agreed it would have little impact on borrowing.
"The FHFA proposed increase in today's low rate environment is not large enough to cause an increase in loan declines and will likely not be noticed by the consumer," Premuroso said.
People can comment or send suggestions about the proposed fee to the agency by e-mailing email@example.com.
States with the longest foreclosure time lines
New York, 820 days
New Jersey, 750 days
Connecticut, 690 days
Florida, 660 days
Illinois, 480 days
Source: Federal Housing Finance Agency
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