(Washington, DC) — U.S. Senator Richard Blumenthal (D-Conn.) released the following statement in response to the decision by the Federal Housing Finance Agency (FHFA)—which controls the Federal National Mortgage Agency (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac)—to charge Connecticut home buyers an additional fee for loan guarantees that make home ownership possible. FHFA chose to impose this fee because Connecticut has established a judicial mediation program and other judicial safeguards to protect homeowners from unnecessary or illegal foreclosures. FHFA claims that these protections lead to a foreclosure process that takes longer than the process in other states, but its proposed fee ignores the benefits to homeowners, lenders and investors that come from having a fair judicial process that treats foreclosure as a last resort.
“I will fight to stop Fannie and Freddie from punishing Connecticut for protecting its citizens from unfair and abusive foreclosure practices. I am seeking immediate action to reverse this misguided, unacceptable decision.
“Fannie and Freddie are raising fees on Connecticut home buyers because their state provides a mediation system that helps homeowners and lenders find mutually beneficial alternatives to foreclosure. Connecticut’s commonsense judicial safeguards protect homeowners from robosigners, fraudulent affidavits, and other big bank tactics that have violated the rights of too many families across the country. FHFA’s proposed fee will significantly increase costs for all Connecticut consumers trying to achieve the American dream of homeownership. It will also threaten our state’s effort to repair the housing market while preventing unnecessary and illegal foreclosures, with all the costs they impose on Connecticut homeowners, taxpayers, and communities.
“I am proud that Connecticut provides protections to help families keep their homes, and to ensure that no Connecticut homeowner is the victim of an illegal foreclosure. And I am determined to protect my state’s right to safeguard homeowner interests.”
Fannie Mae and Freddie Mac charge lenders a “guarantee fee” in exchange for assuming the risk that a loan will default. The entities’ guarantee protects investors in mortgages and mortgage-backed securities, making it cheaper and easier for home purchasers to get financing. The cost of the guarantee fee is generally passed along to the borrower. In addition to Connecticut, home buyers in New York, New Jersey, Florida and Illinois will face higher fees starting in 2013. According to press reports, Connecticut and New York face a fee increase of 30 basis points (0.3%); the other states face smaller increases. Senator Blumenthal plans to work with FHFA to stop the agency from imposing these fees.