Is Fannie Mae blocking short-sale transactions?
Monday, November 19, 2012
By Michael Kara
Note: The opinions expressed in REALTOR® Viewpoint are those of the writers and do not necessarily reflect ORRA's official positions on the issues discussed within.
Back in August, Fannie Mae announced that it had accepted new federal guidelines to "streamline short-sale processes to prevent foreclosures and help communities stabilize.”
So why is it only a few months later that we are seeing reports from other agents, as well as the mainstream media, that show a more obstructionist path being taken by the government-sponsored enterprise?
It seems as though Fannie Mae has been raising prices on approved short sales, by as much as 25 percent in some cases, causing deals to fall through and forcing many of these homeowners into foreclosure. A perfect example of this comes from one of my brokerage's own short-sale transactions that recently fell through. A last minute rejection by Fannie Mae, who decided they wanted a 12 percent increase on the price to the tune of an additional $58,000, quite definitively killed any hopes for our seller of avoiding foreclosure.
Where things become increasingly murky is that these foreclosed homes suddenly become available for purchase via Fannie Mae’s Homepath program. It’s important to note that Fannie Mae Homepath loans do not require an appraisal. The entire reason appraisals exist is to act as a checks-and-balances system so that the buyer of a property is assured they are paying a fair price and the mortgage backer ensures the value of the property. It’s certainly the reason that Fannie Mae requires appraisals on their short-sale approvals. But, with Fannie Mae skipping the appraisal step on its Homepath loans, buyers won’t realize they are overpaying, and their mortgage lender isn’t going to steer them in the right direction because their mortgage lender is also the seller: Fannie Mae!
In an August press release, Fannie Mae’s Senior Vice President Leslie Peeler stated, "Short sales have become an increasingly important tool in preventing foreclosure and stabilizing communities. We want to help as many homeowners avoid foreclosure as possible.” Well, it certainly doesn’t look like Fannie Mae has much of a desire to do that right now.
Increasingly, we’re seeing more instances of these sorts of happenings from across the nation. Chiefly, it is real estate agents pointing out these discretions, quite possibly because they are the only ones who don’t have anything to fear from Fannie Mae’s backlash.
By unfairly inflating prices to force foreclosures, Fannie Mae is destroying the financial lives of many to bump up their bottom line a few points of a percentage. Short sales can be the easiest path available to those in a very difficult situation, and we need to make sure that it remains a viable one. We encourage Florida agents to contact Sen. Bill Nelson via e-mail form at his website or to call his office directly at 202.224-5274 to address their concerns.
Michael Kara, RE/MAX Exclusive Collection, can be reached at email@example.com.
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