Government foreclosures, which include Fannie Mae foreclosed homes, FHA foreclosures and Freddie Mac foreclosures, number about 212,000 foreclosed homes. The Federal Housing Finance Agency (FHFA), the conservator of Fannie Mae and Freddie Mac (the GSEs) has to extend the deadline to evaluation applications of investors looking to buy Fannie Mae foreclosures through the bulk buy program referred to as the REO Rental Initiative.
The pilot program to sell Fannie Mae foreclosure listings in bulk to private firms, not-for-profit entities and other eligible parties will start with the deposition of 2,490 Fannie Mae foreclosed homes in Chicago, Atlanta, Florida, Las Vegas and Los Angeles. Several bidders have revealed that Fannie pushed the original deadline of mid-April into May.
According to an FHFA spokesperson, the agency continues it efforts in “qualifying bidders.” Fannie has not established an official timetable for completing the process. Parties eligible to purchase the foreclosed homes will receive a notification bids for Fannie Mae foreclosures.
Fannie Mae Foreclosures Plan
Bulk sales consist of pools of 500 or 1,000 Fannie Mae foreclosed homes. As part of the Fannie Mae foreclosures deal, winning investors must take less desirable foreclosed homes along with more attractive foreclosure homes. Some sources have revealed that the FHFA received a substantial response, in the range 300 or 400 applications, for the initial roll-out of Fannie Mae foreclosed homes to reduce its inventory.
By targeting several cities hit hard by the rate of home foreclosure, Fannie hopes to mitigate the effects of vacant Fannie Mae foreclosures on neighborhood conditions and home values. The concept involves selling foreclosed homes to investors who will have to rent the homes for a certain number of years before selling them.
Many opponents of the Fannie Mae foreclosed homes program believe foreclosure investors will simply ignore problem homes in the pool and adjust their bids lower based on the desirable foreclosed homes they want out of the purchase. Foreclosure investors will receive even further discounts. An evaluation of this program shows that investors in the Fannie Mae foreclosed homes program should reap significant profits.
Freddie Mac Plans to Sell Foreclosed Homes
Freddie Mac is introducing its own plan to rid itself of foreclosure homes. Freddie plan calls for the agency to sell it inventory of single-family foreclosed homes to institutional investors. Freddie will also provide financing to investors for the foreclosure homes purchases with a new investor loan product. Not only will foreclosures investors obtain government foreclosures at sizable discounts, but with government loans that require a minimum amount of leverage.
Freddie Mac also seeks approval to securitize the new mortgage loans in the same manner as it does for its it make for multi-family mortgage products. Unlike the Fannie Mae foreclosed homes program, Freddie Mac’s program will allow institutional foreclosed homes investors to handpick foreclosure homes. These more sophisticated foreclosures investors will focus on foreclosed homes in specific regions or homes with a certain value.
Market analysts believe the new loan product will have to pass FHFA’s scrutiny and may require a modification to Freddie’s charter. Some critics question the introduction of a product, which expands operations instead of scaling down Freddie’s role in the housing market.
To find out more about future solicitations and other programs in place to sell Fannie Mae foreclosed homes to home buyers and small investors, go to the Fannie Mae or Freddie Mac websites.