CHICAGO (Legal Newsline) - Illinois Attorney General Lisa Madigan sent a letter to the Federal Housing Finance Agency on Tuesday demanding that a proposal that would unfairly penalize Illinois borrowers by adding higher fees on new mortgages sold in the state be abandoned.
Madigan and the attorneys general from New York and Connecticut, in a letter to acting FHFA Director Edward J. Demarco, said that the agency's proposal targets higher fees on borrowers living in Illinois and four other states with critical legal protections meant to safeguard homeowners in foreclosure.
The FHFA, which oversees Fannie Mae and Freddie Mac, claims that additional fees on borrowers who live in Illinois, Connecticut, Florida, New Jersey and New York are necessary because legal protections in the states supposedly result in higher costs to Fannie Mae and Freddie Mac during the foreclosure process. The FHFA's proposal says that the higher fees on borrowers would be eliminated if state lawmakers would roll back the legal protections.
Madigan, however, contends that the FHFA's proposal lacks evidence that shows that statutory consumer protections are the main factors of higher foreclosure costs for Fannie and Freddie. The proposal, she alleges, ignores widespread mortgage servicer misconduct during the foreclosure process, which is a known driver of higher foreclosure costs.
The proposal, Madigan said, is no more than a thinly disguised threat to compel the states to accept higher costs for borrowers in their states or dismantle important legal protections entirely.
"If FHFA's proposal is adopted, Illinois homeowners will inevitably pay a steep price - through higher interest rates or diminished legal protections for borrowers," Madigan said. "Either way, it's a lose-lose situation for homeowners."