I get calls all the time from potential buyers who will ask if a bank will finance a home they hold in title due to foreclosure. It seems to be one of the great urban legends that give people the impression that a bank will turnaround and provide more than generous terms on their foreclosures in order to get a new buyer for the home.
In one case I am able to suggest that such generous terms are not legend but reality. The terms available on FannieMae foreclosures include:
3% downpayment for owner occupants, 10% for investors
No private mortgage insurance (PMI) keeping total payments lower
15 day preference for owner occupant bidders
Investor deed restriction that they will not resell for more than 120% of the purchase price within first 90 days of ownership (discourages flipping).
Some properties offer renovation financing.
In 2009 Fannie Mae launched a new branding program for their foreclosure (REO) properties. Known as HomePath, the program initially identified the financing program that Fannie supports through multiples of lenders. As the years have passed, the brand “HomePath” has come to identify all Fannie Mae REO properties, their marketing, where to find complete lists on the web, and the favorable finacing program. Now, when you see one of our homes “for sale” sign, you will also see a HomePath rider that tells you this is a Fannie Mae owned home. Most importantly, it tells buyers that this home is available with the best financing program available in the USA for foreclosure properties.
Why should you care about Fannie Mae? They have one of the largest inventories of REO properties in the country. Not inferring this is a good thing..but the sheer nature of who they are places them in this unenviable position. Fannie Mae is a government-sponsored entity, chartered by Congress and overseen by the Department of Treasury. Simply, Fannie has been the largest investor in mortgages for many years. Their mission has been to provide liquidity to the market so that banks and mortgage entities could continue to make mortgage loans. This means that a significant portion of the mortgages in the country end up Fannie Mae’s responsibility and as we know, in the last decade this has created problems due to the volume of owners who could not make payments on their mortgages. It is estimated that Fannie Mae has an interest in one-third of all mortgages currently outstanding in the country.
The unfortunate end result is that Fannie holds a very large foreclosure inventory. This fact is why any buyer or agent better be familiar with HomePath and be ready to utilize the program if the opportunity presents itself. Start with a lender who is approved for HomePath and express your interest in using the program. Make sure they respond enthusiastically. Unfortunately, reports do come in to us that some lenders on the list provided at the HomePath site, often are not great advocates of the program. This is their mistake and for you a sign to move on.
All FannieMae HomePath properties are available for review, and bidding by a real estate agent only, at www.HomePath.com.