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Connecticut lawmakers sent a letter to the Federal Housing Finance Agency warning a proposed hike to guarantee fees on mortgages acquired by Fannie Mae and Freddie Mac will increase the cost of homeownership.
The proposed g-fee fee increase will effect five states, including Connecticut, Illinois, Florida, New Jersey and New York. Some estimates from the Royal Bank of Scotland ($10.40 -0.41%) suggests the increase could add as much as $100 to annual mortgage payments in the impacted states.
The g-fee proposal is designed to recover a portion of the expenses associated with mortgage defaults in states where the entire default process takes longer. The subject of raising g-fees is the focus of the November HousingWire magazine cover story. In that article the FHFA states, “the enterprises have used to calculate state-level cost differences in this proposal are based on a combination of enterprise experience and estimation,” the agency explained. "Actual costs incurred by the enterprises in the future may vary over time and among individual defaults within a state."
Members of Congress from Connecticut advised FHFA acting director Ed DeMarco in a letter made public this week that single-family mortgages in Connecticut could experience an additional 20-basis point fee hike, starting in January.
Sen. Richard Blumenthal, D-Conn., commented on the hike in the FHFA letter saying, the proposed g-fee hike almost encourages rushed foreclosures in states where it currently takes longer. He added that the longer timelines often come with the added benefit of additional loss mitigation procedures, which can save homes from default and prevent other foreclosure-related costs.
The g-fee increase proposed by the FHFA was designed to price in local risk factors tied to states that experience longer foreclosure timelines.
Analyst Sarah Hu with RBS recently pointed out that foreclosure timelines in the five impacted states run an average of two years.
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