Are Mortgage Fees Going Up in Your State?

A proposal that was released this week by the Federal Housing Finance Agency would increase mortgage fees for mortgage borrowers in several states. The proposal, if implemented, would impact five states – New York, Florida, New Jersey, Connecticut and Illinois – and it would only apply to the mortgages that are secured by Fannie Mae and Freddie Mac.

The five states that the new proposal would impact are those states where it takes the longest to foreclose on a home. The decision was based on the length of time that it takes for the Federal Housing Finance Agency (FHFA) to take back the title to a home along with the costs of legal fees, property taxes and other expenses that the ban. According to the Wall Street Journal, there is a simple logic behind the new proposal – the longer it takes for a lender to foreclose on a home and retain ownership, the higher the fees are going to be. These are the five states where the average total carrying costs for homes are much greater than those of the national average. As a result, these create more costs for taxpayers and for Freddie and Fannie.

According to officials in these five states, one of the reasons that it takes longer for a foreclosure to occur is because many of the banks that made the deals with home buyers dismissed established foreclosure practices and, as a result, ran into problems with loan documents and “red tape.” The “robo signing” scandal that occurred two years ago in which some of the banks had used incomplete or faulty paperwork to make the foreclosure process quicker was one example. These issues caused the courts to virtually shut down the foreclosure process in some states.

Some representatives in Congress aren’t happy about the new proposal, though. Brad Miller of North Carolina said that this new legislation was nothing more than “bullying states that are protecting homeowners from foreclosure abuses.” He stated that the five states where it takes the longest to process foreclosures are simply doing their due diligence in making sure that the foreclosure process is done correctly so the “robo signing” disaster doesn’t occur again.

Fannie and Freddie are planning to increase the fees on mortgages in these five states by as little as 0.15 percent to as much as 0.3 percent of the loan amount. In terms of monthly payments, for a $200,000 mortgage on a 30-year fixed rate term, it could cost the buyer between $3.50 and $7 per month if these fees are enacted. This might not seem like a large amount, but it will be an unprecedented move in the industry as state-level mortgage prices could become the norm.

Do you think states should be singled out for added fees based on the amount of time it takes to foreclose on a property? Or is that going to be a signal to other states to expedite the foreclosure process, which could lead to more robo signing like problems?

Compare mortgage rates and fees where you live here.