Just in time for the holidays, financial regulator Edward DeMarco plans to deliver tri-state area homebuyers a big black eye.
It comes in the form of higher fees for mortgages on single-family homes — $7 a month on a 30-year fixed-rate mortgage of $200,000.
DeMarco heads up the Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac. He’s set his sights on New York, New Jersey and Connecticut because of their long foreclosure time lines and the costs to Fannie and Freddie when mortgages default.
So DeMarco wants to jack up the fees Fannie and Freddie charge for mortgages originating in these states. Comments on the proposal are due Nov. 26.
A chorus of critics is lambasting the proposal, including 18 members of Congress in a Nov. 7 letter. Sen. Chuck Schumer (D-NY) dubbed it “unfair and unjustified,” and Sen. Kristen Gillibrand (D-NY) also protested.
The key critiques:
* Fast foreclosures leave the door open for fraud. New York’s time line results partly from strong consumer protections that were instituted after the scandal over abusive foreclosures broke in 2010.
* Delayed foreclosures do not automatically increase losses for Fannie and Freddie.
* These fees would raise the cost of new loans, but that has no relationship to default rates on old loans.
Lawyers and financial experts are outraged over the section in the official notice that says FHFA might ditch the fees if states adjust their “laws and requirements to move their foreclosure time lines more in line with the national average.”
“Basically it says, scale back protections for consumers, and we’ll lower the fees,” said Mark Ladov, an attorney at the Brennan Center for Justice at NYU School of Law.