Fannie Mae Offers Incentives on Foreclosures
Fannie Mae is now offering an incentive to buyers who write an offer on a Fannie Mae property during the First Look™ period. According to the HomePath® website, “A foreclosed property can represent a great opportunity and a good value—but a HomePath® property can offer even more.”
The “even more” that the website refers to is the opportunity for owner-occupant buyers to receive closing cost assistance, and also take advantage of the special financing opportunities associated with obtaining a HomePath® loan.
Terms and Conditions Apply
Fannie Mae is offering up to 3.5% in closing cost assistance to buyers who plan to occupy the home and who write an offer on one of their foreclosures prior to March 31, 2014. The other conditions are as follows:
- The transaction must close on or before May 31, 2014.
- The closing costs must be requested when the offer is written.
- The buyer must use the property as a primary residence or the buyer must be a public entity.
- Only properties in certain states are eligible.
- The offer must be made during the First Look™ period (a period of time “created to promote homeownership and contribute to neighborhood stabilization” when the property is only available for purchase to buyers that plan to occupy it as their primary residence).
- Other the additional terms and conditions are detailed here.
Take a Second Look at the Program
Almost exactly a year after I reported that Fannie Mae was being accused of forcing borrowers into foreclosure, I’ve just come across the announcement about this new program, which started on Valentine’s Day.
Over the last 12–18 months, short sales on Fannie Mae properties have not been easy. Valuations have come back exceedingly high, and negotiations to prove to Fannie Mae and servicers that their values are not aligned with market value have been challenging. With challenges in convincing Fannie Mae to agree to approve a short sale at market value, many additional Fannie Mae properties have ended up in foreclosure.
Last February, many people accused Fannie Mae of intentionally overvaluing their properties. As a foreclosure, Fannie Mae can list the property above the current market value, and seek buyers willing to obtain a HomePath® loan.
With the Fannie Mae HomePath® loan, no appraisal is required. With no appraisal, the buyer could pay 10% or even 20% over market value. Ironically, of course, the new owner of the Fannie Mae REO now owns a property purchased for more than market value; the owner is now underwater like the short sale seller that couldn’t get his short sale approved just a few months before.
Between the HomePath® loan with no appraisal and the 3.5% of closing cost incentive available, it seems less than amusing that the same Fannie Mae that promotes homeownership and neighborhood stabilization is dangling this carrot in front of homebuyers. As for me, I’d say that writing an offer on a Fannie Mae property during the First Look™ period might deserve a second look.