Madigan calls on Fannie, Freddie to
abandon higher fees on Illinois homeowners
Attorney general says proposal would
unfairly penalize states that protect homeowners in foreclosure
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[November 29, 2012]
CHICAGO -- Attorney General Lisa
Madigan has sent a letter to the Federal Housing Finance Agency,
demanding the agency abandon a proposal that she says would unfairly
penalize Illinois borrowers by tacking higher fees on new mortgages
sold in the state.
In a letter to Edward J. DeMarco, the acting director of FHFA, which oversees
Fannie Mae and Freddie Mac, Madigan and her counterparts in New York and
Connecticut said the agency's proposal targets higher fees on borrowers who live
in Illinois and four other states that have enacted critical legal protections
to safeguard homeowners in foreclosure.
FHFA claims the additional fees on
borrowers living in Illinois, Connecticut, Florida, New Jersey and New York are
necessary because the states' legal protections supposedly result in higher
costs to Fannie Mae and Freddie Mac during the foreclosure process. In addition,
FHFA's proposal makes clear that higher fees on borrowers in these states would
be eliminated if state lawmakers roll back these legal protections.
Madigan and the attorneys general said FHFA's proposal lacks evidence showing
that statutory consumer protections are the main factors in higher foreclosure
costs for Fannie and Freddie. In fact, the proposal ignores a known driver of
higher foreclosure costs -- widespread mortgage servicer misconduct during the
foreclosure process, as demonstrated by the $25 billion national settlement
reached earlier this year with the nation's five largest servicers.
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Madigan said that ultimately, the proposal amounts to a thinly
disguised threat to compel the states to accept higher costs for
borrowers in their states or dismantle important legal protections
"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."
[Text from file received from the office
Illinois Attorney General Lisa