Not only are mortgage industry giants Freddie Mac and Fannie Mae household names, they own most of the households in the country. So why are they the least likely to help homeowners in need of a short sale?
This last statement may surprise you, but it couldn’t be truer. Earlier this year both Freddie and Fannie made a vital decision that you won’t hear about in the daily news reports: foreclose on more homes. Freddie started a campaign to foreclose on any home that does not have short sale approval in writing. Fannie did the same thing, but the short sale had to close prior to the foreclosure sale date. Several lenders have confirmed that they have standing orders from both Freddie and Fannie to do this. Some lenders, like Bank of America, have internal guidelines that they will not attempt to request a postponement from Freddie or Fannie unless the short sale is already approved.
So how do these devastating decisions impact agents, sellers and buyers?
We recently had a short sale with Freddie Mac as the investor and Bank of America as the servicer. We obtained short sale approval and then the nightmare of all short sale agents happened: the buyer walked. It was not a problem, though, because we had a back-up offer at the same price. We immediately submitted the back-up offer and informed all parties that there was a foreclosure sale date and we absolutely had to get this done prior to that date. It should not have been too hard…we had an approval that was only a few days old. Bank of America’s Equator system then had a fatal error with our file and we had to start the process from scratch. We put the offer in front of them again and Bank of America sat on it for three weeks. All they had to do was change the buyer’s name on the approval, but it seemed to be too large a task for BofA.
After all this, Freddie Mac foreclosed on the property. Worse yet, the home did not sell at foreclosure auction, but instead was added to their fast-growing list of REOs.
We see this and similar scenarios time and again with both Freddie and Fannie. There is a valid offer and the buyers are qualified, willing and able, yet the investor prefers foreclosure. Even after the same taxpayers who are asking for help padded them with over $171 billion dollars since 2008, Freddie and Fannie refuse to acknowledge common sense solutions. Until they change their ways, they will drive down property values with additional foreclosures heaped on an already collapsed market…and, in turn, continue to collapse both Freddie and Fannie.
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What makes things worse it Fannie and Freddie are now reportedly going to pursue borrowers for the deficiency judgement. At the same time they are assisting in creating the deficiencies. I don’t want to turn this political but NAR, NAMB and any other groups need to be writing congressmen and senators. These people are trying so hard to do the right thing only to find the lenders are after them and now so are the insurers on these loans. We need to be a voice for them and our industries. It is so wrong.
I liked you article. not afraid to call a spade a spade. You hit on 3 of the 4 associations most disliked by most Realtors. You have to include the VA. I had a foreclosure handled by VA pulled 10 minutes before closing. Managing the sale was BofA.No surprise! Still waiting to hear from either on what happened. saddest part of it all is about 3 weeks later the property is back on the market. It is now pended and I sincerely hope these 2 inept associations get it right this time.
Karen – I don’t think it’s too political to say that. We need to stand up for the homeowners when no one else will…and if that takes writing everyone we can then so be it. Organizations like the ones you mentioned should take a more definite stand on helping homeowners as well. There’s no way to change the way things are done if we don’t say something about it!
Hank – best of luck in your short sale. Please do update the blog when you find out what happens so that we can all be in the know!
I’ve never been a big McCain fan, but I have always rpesected him. He marches to a bit of a different drummer than most politicians, so that means he steps on many toes along the way. Like him or not, this election is so important I HAVE to give my vote to the man. You don’t like the discriptive language that I’d like to use in discribing what we’d be if Obama wins, but I’d think you know. Thanks for suggesting to your fellow musers to go ahead and hold their nose and vote for America this time. And look at it like this, in four more years Jindal should have Louisiana straightened out so a Palin/Jindal match might be just the ticket back! Or maybe Newt may be finished with whatever it was that kept him out of this one There is hope yet, and it’s initials don’t start with a B and a O.-Al