Fannie’s Done It Again
In yet another major move by Fannie Mae, the company has announced that it will cover the closing costs on purchases of its repossessed properties. Basically this means that buyers will receive 3.5% of the final sales price. This money can be used towards closing costs, or for new appliances. (Yes, that Ferrari in my driveway is an appliance!)
Closing on the house must be completed by May 1, 2010. Another incentive they are offering is only requiring 3% down on house purchases through HomePath Mortgage.
Fannie Mae has finally wised up to the fact that the best way to help the market recover is to get those foreclosed properties off the market. They’re hoping that many buyers taking advantage of the federal tax credit, for this additional help may move some of those properties.
This may or may not have something to do with Fannie’s recently released date (though not news to us) that the rate of delinquent loans has escalated. Meaning we’re going to see a flood of new foreclosures. Which means Fannie knows the value of its inventory is going to be worth less than Obama’s Nobel prize soon. So their philosophy is “get ‘em moving now.”
We’ll see how this drama plays out… But we’ve seen it coming since the middle of last year. The key is to keep the properties moving and not let this shadow inventory of foreclosures turn into a nightmare. We’ll keep doing our part, helping honest, decent folks find their way out of debt and into new homes.
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yea it will be intersting to see how it goes I hope fannie mae is serious about getting rid of these houses. I have talked to several investor friends who say that some banks are sitting on properties hoping to get full retail value on them.Time will tell if they unload the properties or not
The 3.5 Percent Seller Assistance on HomePath® Properties program is not bad. It’s a very good incentive for real estate investors to add on to other discounts such as $8,000 for first time home owners. I looked at one of the hot real estate communities in Maryland for investors which is Prince George’s county and HomePath Properties offers properties ranging from $24,000 to $349,000. A smart investor would take advantage of this to either assist a buyer or wholesale the property to an investor looking to do Section 8 or Rehab/Flip or other strategies. The disadvantage is May 2010 is closer than it appears and time is flying by so we have to act now.
Well, it sounds good, but… we’ll see. Hopefully, with all the REOs currently on the market and forthcoming, the deadline will be extended.
This sounds good and well, but I am worried who will actually be paying for this “bonus”. Yes, it is good for hose who turn the proffit but but I always try to look at what is behind door number three? I hope it is an honest incentive that we can put to good use.
I’m glad Fannie’s decided to give buyers an incentive to buy its REOs. The more incentive buyers have to buy the better. I wonder what took them so long. Hopefully, Fannie will continue offering these and/or other incentives after the deadline.
Kelly H., Virginia
It certainly sounds like it could help stimulate sales, but the deadline is awfully short. I guess that way if doesn’t work they can shut it down quickly and if it does work they can extend the deadline.
Craig S., California
I think this is just the beginning, I think more banks will soon be following the same path. I am starting to see signs that there is a lot of inventory in the pipeline. First, FHA removes the seasoning and the Fannie pays for closing costs, this is all being done because all the foreclosures are not being sold fast enough and a whole lot more is on it’s way.
Ever E., Florida
This is nice, but it is too little too late for the retail side. When you let good homeowners go bad because you have no loan programs for small biz owners and you hold jumbo rates high and you take the market and let values come down hard for 2 years then you are going to have all kinds of issues. Home owners that are upside down and getting ready to adjust are going to walk after the 6-9 months of not paying their mortgage. A small price to pay on your credit to not owe $200K over the value of your house. The only winners will be cash holders that want to buy and hold. Any of those want to contact me I have a plan for you. People will pay when they see a solution to their negative equity.
Is this an across the board incentive or is this another attempt to sell distressed properties only to owner occupants and exclude investors?
Jeff. Texas
As a reral estate investors perspective this is another way we can capitalized on to grow the business. To my experience there is lots of good people that’s been to a not so good situation before that they are not able to own a home but with this new effort of Fannie we are definitely in a good position to weather another storm of oppurtunities.
Warmest regards. Henry B. Lubbok, Texas
I think this shows some serious action on the part of this GSE where they may just have learned from their previous mistakes as far as their involvement in the “housing market crisis”. It makes me think the Obama admin. has had some say in continuing to allow FM to be a GSE by letting them know they should contribute to solving the repo housing inventory. I think this will definitely add some positive ammunition to getting rid of some of this inventory but this won’t put a dent in the ARM’s set to change in the near future that they will most likely have to extend this benefit to get rid of those. Of course the govt. could also create a program that allows the qualified home owners with ARMS about to reset to modify these loans. What am I saying we all see how their involvement in HAFA and other ineffective programs has done. Perhaps they will have learned from their mistakes and this time do more to affect change.
Jason K from TX
Sounds like they are starting to see that moving these properties will do more than sitting on them. Now we just need to be able to get to them. Will investors be able to buy these, or are they being held for owner occupants? The extra percent for closing costs is a nice gesture, hope to see more coming in the future. Keep the good information coming!!
If Fannie is so anxious to sell off it’s inventory, why then are they still excluding investors? Here in Vegas every new Fannie-owned home listing comes with the caveat that no investor offers will be considered for the first 15 days. This is ridiculous!
I suppose any little bit can help. I’m happy that Fannie is making some “improvements” to there otherwise strict regulations that they have been had in place for far to long. Long Live The Short Sale!!
good info. t is necessary to keep up daily with all the changes that are going on.
rose r
CA
Cory,
Great information to know, thanks for bringing it to us. This is great that they are finally trying to come up with ways to help incentivise buyers to buy REO’s and help stabilize the market at the same time. They need to keep thinking along these lines to come up we new and improved programs to help get these REO’s off the books and back out to the hard working Americans.
Thanks,
Neal B., North Carolina
This is great there are lots of properties in my county that will come of the market with this program. This is a bailout for the public that will be benefit all even the state and county will get taxes from these properties being occupied again
That’s great news for people that are in the position to buy right now!
What a short completion date though – May 1st. Hopefully this helps boost sales and they extend it when they see it helping.
Jennifer C, NV
This is good news, especially to investors. We have to keep things moving, even inventories, or the whole system would fall apart. It is also good news that there is a software program like FreedomSoft and all of the people involved like this to help with these inventories. That’s why America always comes out on top during hard times, we’re always at the forefront of everything. That includes innovation, real estate courses, software, etc, or even the number of people like you and I who are willing and able to go out and get it done. God Bless America!
I think it’s favorable news for investors & at least a catalyst to get things flowing. Especially considering last weeks news Fannie reported 90 day delinquencies as of Nov ‘09 are up about 2 1/2 times as compared to a year earlier. Not to mention the growth in subprime defaults is slowing while the defaults on prime loans is accelerating and accounts for about 90% of mortgages guaranteed by Fannie. It will be interesting to see how successful the audits are in forced loan buybacks, BofA & JPM Chase being the biggest targets so far just a drop in the bucket. Some analysts say loan origination profits are threatened to be wiped out, however as the coupons payed out on new issues of Fannie Mae Bonds are lower and guess who’s profiting from that increased spread, yep the banks.
Fannie Mae’s steppin up to the plate. Maybe they get it. If you want to stimulate the economy and spur growth bail out the people, not the banks. This is still gonna be a “tuff row to hoe”. But this economy can use any little boost it can get.
The fact that I’m from the Great State of Georgia and have been in the real estate business for awhile.
I’ve driven through so many unfinished subdivisions and have seen many foreclosures in many different communities.
It’s a heart breaker to witness this scene.
However, in Fannie Mae’s situation it seems like a band-aid approach with their backs up against a wall.
However, in the current market conditions and foreclosure peril any bit of assistance on any side no matter how large or small is a benefit to nudge the industry forward.
My hope is that Fannie will extend this 3.5% way beyond May 1st 2010 for example through the summer up through the fall of 2010.
I Pray for the economy, the market, the industry and this Country that we will prevail and things get back to level.
Best Regards to all, Jerry P.
Well, its about time Fannie Mae decided to do something positive. I mean really, how long could they possibly keep their inventory of foreclosures and REO’s and not simply understand that their crippling the economy even worse. I mean what good is it to keep inventory and look the other way and act as if they’re not a part of the problem. 3.5% of the final sales price is a huge assistance for buyers, it starts to help move properties and helps investors in the process. Kudos to Fannie Mae for doing something to actually help and not hurt like the ridiculous seasoning requirements.
The easier they make it for people or investors to buy their homes the faster they will sell them, there is no need to reinvent the wheel here. Getting together a big down payment can be next to impossible, it’s like moving into a rental they usually want 1st, last, security dep. and in some cases a cleaning dep. non refundable to boot, then if you want to move somewhere else you have to wait 15 to 30 days to get your security dep. back. So anything they can do to help make it easier when buying a home I’m all for it. I just wish it would be possible for the 8K first time buyers program could continue through at least the end of the year, although I heard it was going to be part of the governments scaling back. I’m sure it will all even it’s self out in the end after I win the Freedom $oft copy I’ll be able to find the deal of my life time. It’s going to be a great 2010. God Bless Us All. Darryl W. Oregon
I am glad to see this move made! It will be interesting to see how many folks take advantage of this along with the other home buying incentives. It is something that thankfully someone(s) realized needed to be done… There is such a huge market of REO’s and these have to be moved, because there are many more foreclosures in the pipeline. This can only help keep things moving in the system. If other things need to be changed to make things move even quicker, hopefully the folks making those decisions will keep being open-minded
Tim P., North Carolina
Chuck H. in California mentions his concern about who will be footing the bill for this new bailout package. I could tell you exactly where the money will come from, but I think you already know.
I don’t know if this deal will do a whole lot since the market has been in free fall for so long. I’m sure it won’t hurt the real estate industry in the long run, but it will still be a while before we see any decent recovery and in the meantime, there will still be a lot of foreclosures due to the fact that too many people who couldn’t afford what they were buying were extended credit even though the banks could see the buyer was on shaky footing at best.
Robert P., California
I think that’s a very insightful and helpful move on their part, and if I could afford to buy a house, it would sure help me. What they aren’t acknowledging is that investor’s such as you and probably most other people on here, as well as what I hope to be able to do as well once I’m able to start on it, are the ones really helping the most amount of people through the morass of the current crisis. And, that they want to get some of the financial rewards for themselves rather than let investors get it all.
My own situation is grim, but I’m optimistic that 2010 will be the year it turns around for the better. I know I’m to give God thanks in all things, but it’s so hard to at times. However, I’m choosing to anyway and God gives me such peace when I’m grateful to Him in all circumstances, trusting that He is with me wherever I go. I know that He has ‘plans for welfare and not calamity, to give you [me] a future and a hope.’
Hhmmm… are they getting nervous over their ever increasing inventory? I agree with Jerry P., this is a “band-aid” approach. It will help move some of the repo’d properties however, until the powers that be start really working with investors who offer a better solution to owning a home, their inventories are going to increase…dramatically.
Kimberly F., Pennsylvania
Absolutely not enough time for this to take effect. This is a very good program however, these banking programs need to be head by people that know what they are doing.
What a bungle Fannie and Freddie are. I agree with the recent comment from the previously supportive senator. He said that the whole concept of Fannie and Freddie should be rethought because it isn’t working.
I’m surprised that Fannie and Freddie are discounting. Even a little. They’re in trouble, so they should be discounting. But the US government stepped in and wrote them a blank check. Agreed to back them 100%. So they’re not motivated because they’re not in danger of going under.
It’s a smart form of marketing to get people to put some heat behind procrastinating about buying a home and without deadlines being placed the economy would suffer more than at this moment. I think everything is going to be extended as usually in terms of incentatives and rebates. If not, it would certainly, drive interest rates even higher and all the new inventory homes that they are anticipating to come from all the new forclosures will definitely, sit for longer on the market compared to the existing inventory of homes. Expect some common sense to finally trickle down. Don’t be surprised to see forms of rebates to be inter twined with home purchases. At some point they are going to be forced to give investor a fair amount of incentative as well. They are going to be forced to make common sense approaches to ever increasing inventory. There’s is no way out. It only makes sense inorder to get the dollars into circulation more rapidly in America by creating more opportunities for housing sales. Perhaps the new ruling with the seasoning on titles for selling homes to FHA buyers being lowered is one example and just a taste of what’s to come. Don’t believe all the hype with the Analyzation in the media. I’m curious to see any real statistics on evictions that are not getting any publicity in the media. If foreclosures are so high right now and increasing imagine where evictions are at this moment in America? Eviction court is certainly, rocking with fees from the process and competing with traffic court on speeding tickets.
Freddie Mac and Fannie Mae have been the King and Queen of the real estate cock block for quite some time. Although they have helped millions of homeowners get homes, their own archaic bureaucratic processes and investment demands has kept them from modifying loans quickly and allowing significant enough modifications to provide sustainable long-term foreclosure prevention.
In other words, telling me I owe you $100 and offering to give me an extra 2 months to pay off the $100 plus $200 in interest doesn’t really help me. If I can’t pay the $100, then how the heck can I pay $300?
That said, I’m glad that on the other side of the spectrum, they’re trying to make it easier to get homes for those out there who can afford them. It’s cart before the horse to me, but maybe it’s a preview of a leaner, more logical process to get back to servicing the “little guy” and not just their own wallets.
That sounds like a good plan…go Fannie! I wonder if they might extend that May deadline so that more people can take advantage of it.
Honestly, I think the Fed backed mortgage lenders will ultimately fuel another bubble that will burst 3-5 years from now and we’ll be right back where we are right now. The problem is to big and too systemic for the current administration’s “Quick Fix” mentality. It took us 20 years to create this problem, it cannot be fixed in much less than that.
In a time when FHA is raising credit score requirements, down payments, and the up front fudning fee and monthly mi this is a breath of fresh air. Many of these programs need to last longer though to stimulate sales and help the economy in my opinion. Antother thing I see, and beleive Cory has written about this before, is the need for them to go in a fix up some of these proeprties to make them able to be financed particularly through FHA. This is the main funding vehicle for many buyers right now and so many of these properties won’t pass the appraisal due to deficiencies that often aren’t that costly to repair. They eat hundreds and thousands of dollars of interest every month holding these properties and not fixing them and could have sold them to a willing and able buyer who can’t finance them due to minor deficiencies.
In the last quarterly report to congress by the TARP top official, Neil Barofsky, he warns that another bubble is forming. Read the report here… http://www.sigtarp.gov/reports/congress/2010/January2010_Quarterly_Report_to_Congress.pdf
Barofsky is accusing the Obama administration of recklessly reinflating the real estate market in an attept to keep housing going and prevent another collapse of financial institutions. In short he says that the FED is buying MBS (Mortgage Backed Securities) in enourmous and unsustainable volumes. They ar spending hundreds of billions more to capitalize Fannie and Freddie. The plan to cover closing costs and tax credits are also means to spur buyers into the market place which has the effect of keeping prices up as inventory moves. He also points to the HAMP program as a means to forestall foreclosure and have the intended effect of keeping prices elevated, by again keeping future foreclosures of the market, albeit for a short period, as we all know that HAMP is limited and not working. Barofsky is the former NY attorney general and specializes in mortgage fraud. Page 111-127 of the report get right to the heart of the matter.