the latest story from Shahien Nasiripour of the Financial Times should settle all doubts. The pink paper reports that Fannie and Freddie’s regulator, the FHFA, plans to punish impose surcharges on borrowers in states like New York because foreclosures take longer there. This is the excuse, erm, rationale:
US borrowers in states where home foreclosures are costly and time-consuming will have to pay more for their mortgages, the top housing regulator has proposed...
What this is really about is a further push to try to achieve national standards, even though real estate or “dirt law” has long been treated by the Supreme Court as a state law matter. So the power of the GSE is being used to pressure state legislatures to join a legal race to the bottom. If state bar associations had instead players their proper role and had disbarred foreclosure mill attorneys, Fannie and Freddie would have been forced to clean up their act on foreclosure processes and the FHFA would not have found it as worthwhile to try to implement this sort of extortion.
It is hard to see this as anything other than bullying states that are protecting homeowners from foreclosure abuses. FHFA has no business holding a state’s new mortgage market hostage to extort weaker homeowner protections for existing mortgages.