The Federal Housing Finance Agency is running into resistance from Connecticut lawmakers for its proposal to charge upfront fees on GSE mortgages originated in states with long foreclosure timetables.
Under a FHFA proposal, borrowers in Connecticut, Florida, Illinois, New Jersey and New York would pay an extra 15 to 30 basis points upfront fee because of the high foreclosures costs.
The FHFA’s proposal would incentivize “rushed foreclosure proceedings with less due process for homeowners resulting in needless evictions of families from their homes,” according to a joint letter by two senators and four House members—all Connecticut Democrats.
“If FHFA wants to reduce costs on Fannie and Freddie, it would be better off penalizing servicers who slow down the judicial process because they are either unprepared or unwilling to work with homeowners,” the Nov. 13 letter says.
The comment period on FHFA’s upfront fee proposal ended Nov. 26.
The seven lawmakers point out that Connecticut permits mediation between troubled homeowners and servicers. And 82% of mediations result in the homeowners remaining in their homes or finding a foreclosure alternative, such as a short sale.
“We urge FHFA to immediately withdraw its proposed fee increase,” writes Sens. Richard Blumenthal and Joseph Lieberman along with Reps. John Larson, Rosa DeLauro, James Himes, Christopher Murphy and Joe Courtney.