The Missouri Credit Union Association (MCUA) filed a comment letter with the Federal Housing Finance Agency (FHFA) in response to its proposal to adjust the guarantee fees (g-fees) that Fannie Mae and Freddie Mac (the GSEs) charge for single-family mortgages in certain states. Specifically, the adjustment would increase the g-fees for single-family mortgages in states where costs related to state foreclosure practices are higher than the national average; these states are Connecticut, Florida, Illinois, New Jersey, and New York.
The FHFA’s methodology to determine the cost of foreclosure is based on the expected number of days it takes the GSEs to foreclose on a property in a particular state and the average per-day carrying cost to the GSEs for that time period. As stated in our letter, we are concerned that other factors should be considered, such as the number of foreclosures over a set period of time, and how factors beyond the control of lenders or consumers, such as state law provisions on foreclosures or judicial review of foreclosure proceedings, affect the processing of foreclosures. While some of these other factors may be reflected in the expected number of days it takes a GSE to foreclose on a home in a particular state, the proposal appears to be an exceedingly crude reflection of such factors. Each such factor requires its own identification and analysis to determine what the effect of the FHFA’s proposal might be on the concerns and policies underlying it. For instance, before concluding that higher g-fees should be charged in states with strong consumer protection provisions in their statutes, FHFA should analyze what the effect would be on lenders and consumers if such protections are discouraged.