Attorneys who handle foreclosures for Fannie Mae will be able to charge as much as $1,300 per case in the state starting next month, a nearly 40 percent jump that will make Maryland's fee one of the highest in the nation.
The decision to increase the amount by $350 was met with concern Friday by Maryland regulators because it will be added to the total that struggling borrowers must pay to avert an auction.
"The homeowner ultimately has to bear the cost of those fees," said Anne Balcer Norton, Maryland's deputy commissioner of financial regulation.
Fannie Mae, a mortgage-finance giant that controls a large share of the market, said in a statement that changes to the state's foreclosure process "require additional work by attorneys which justify an increase in the foreclosure fee." It did not specify which changes.
Since July, Maryland homeowners have had the option to request foreclosure mediation before an auction can occur. The state court system also instituted emergency rules in October to stamp out "robo-signing" and similar documentation problems.
The foreclosure process has been upended nationally since last fall, after employees of mortgage servicers — and some law firms — acknowledged signing affidavits by the thousands, attesting to borrowers' delinquency without verifying whether the information was correct.
Ally Financial's GMAC Mortgage said this week that it was dropping about 250 cases in Maryland that had "potentially defective" documentation and would file them anew after each case is reviewed. Wells Fargo & Co. confirmed Friday that it also is dismissing foreclosure cases in Maryland, though the lender did not say how many.
Though foreclosures must be filed with the courts in Maryland, the process is essentially nonjudicial. Homeowners do not have an automatic right to a hearing.
By increasing attorney fees to $1,300, Fannie Mae is raising reimbursement in Maryland above all other nonjudicial states. The company allows a charge of $1,300 or more in eight other states.
Norton said the sizable increase doesn't make sense. The mediation process in Maryland hasn't created a workload equal to what attorneys face in states that require full court proceedings, she said. And the new court procedures mainly underscore that people can't swear that something is a fact if they don't know whether it is.
"That's not changing the law," Norton said. "That's ensuring the integrity of the documents that are already required to be filed based on personal knowledge and sworn under oath."
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