AuthorBio: Dominique Brown is the CEO of DNB Financial Planning, landlord, financial educator and non-profit owner. He enjoys working out, helping others and everything finance. His sole purpose for creating Your Finances Simplified is to share his passion of personal finance and to help you simplify your finances. He loves questions.. So feel free to ask him anything!
Fannie Mae is the name commonly associated with the Federal National Mortgage Association. It is a publicly traded company that is sponsored by the government with the purpose of expanding the secondary mortgage market by allowing lenders to reinvest their assets. Fannie Mae may have properties for sale because a homeowner was unable to avoid foreclosure on the home in which Fannie Mae was the investor
HomePath and Fannie Mae
HomePath.com by Fannie Mae provides a home buyer with the tools to search for a home that fits with his or her price, location, size and style preferences, as well as offering financing with a low down payment and flexible mortgage terms.
Related Article: How To Buy A Foreclosure
HomePath has one distinguishing feature when it comes to their home search, and that is that they only offer listings for foreclosed properties owned by Fannie Mae. The selection of properties includes single family homes, townhouses and condos. While sales prices vary, most are newer homes that require repair. HomePath financing is only available for properties owned by Fannie Mae by result of a default mortgage, and they claim to have special offers and incentives but also mention home buyers have their choice of lender.
Foreclosures and the Housing Market
While HomePath provides housing options on the real estate market, they are ruining the housing market by only providing financing for foreclosed homes owned by Fannie Mae. Foreclosed homes are homes that the previous owner could not pay the mortgage on, and therefore, they were turned over to its lender (the “bank”). Foreclosed homes are bad for the housing market because they typically sell for lower prices, and, as a result, they lowering the value on neighboring homes for sale.
Related Article: Why Harp 2.0 Will Not Work and How Banks Really Think
HomePath.com is doing potential home buyers an injustice by only offering listings on foreclosed properties and not allowing them to search for other homes that fit their price, location and size requirements.
Why purchasing a foreclosed home from Fannie Mae is bad for the housing market…
- The economy receives zero stimulation for the purchase of a foreclosed home because all of the funds go back to the lender to make up for the mortgage that was defaulted on by the previous owners. Whereas a person selling his or her home generally makes a profit and usually has money to spend, and/or the realtor makes a commission and also has money to spend.
With HomePath financing, Fannie Mae is the only company to see any of that money.
- The lower price of a foreclosed home reflects poorly on the value of neighboring homes and can result in a much lower selling price for the other houses on the street.
- Foreclosed properties are flooding the housing market, and other home sellers are having a hard time competing Fannie Mae, which is promoting this by only offering financing for foreclosed properties.
- A foreclosed home is sold “as-is” and many times, it is not properly inspected, which can lead to problems for the new owners. They might have a false sense of security when they acquire the home at a low price, but in reality, it is in need of costly repair.
Because HomePath by Fannie Mae only offers financing on foreclosed homes and foreclosed homes are bad for the housing market and economy, Fannie Mae is helping to bring down the real estate market.
While buying a foreclosed home is not necessarily a bad thing, you should make sure to do your research. You do not want to be tempted by the low price tags and end up buying something that is not worth the money.
Have you ever bought a foreclosed home? Did you flip it? Keep it? Have you used HomePath? Tell us your story!
No, I’ve never bought a foreclosed home – always had this vague fear the family that was foreclosed on would come back for revenge! 😛 Interesting article – I’m from Canada, so it was nice to learn a bit about Fannie Mae. I’ve heard of it, but that’s about it!
I purchased my very first home as a foreclosure (during the real estate collapse) the families don’t come back to get you. You have to worry about them damaging it before you buy it.
I have never bought a foreclosed home, but I have definitely considered it. I would only ever pay cash for one of these homes in the states and would do a ton of research since the laws in Canada are much different.
Why would you only pay cash? Buying a foreclosure is no different than buying a regular sale. The only difference is a step step discount. Think of it as buying a home 2nd hand or used instead of from the flagship store. Nothing wrong with used closed -)
We’ve only bought one house in which we’re in the process of selling. We’d love to buy a foreclosure for our next house (despite the fact that it may not help the housing market) but I’m not sure it’s going to be in the cards for us.
We’ll see how things play out I guess.
Foreclosures are not good for existing owners, but they are great for new buyers 🙂
I don’t think the hassle would be worth it unless it was solely an investment property.
Sean,
What hassle are you referring to?
I put offers on 3 foreclosure houses in Orange County, California with 20% down, and offered 15k more than asking price. All of my offers were outbid by cash buyers. And you know how much the houses are, ranging from 325k to 345k. The house inventory right now in some markets are really scare. It even happens to Las Vegas area. So it depends on which market to see whether you can get the foreclosure house with mortgage or cash. Cash is always the king.
By the way, in Canada, the real estate laws are much different, regarding to down payment. Mostly requires higher down payments than in the U.S. That’s one of the reason why Canada did not get into the housing buble like the U.S. FHA loan in U.S. only requires 3.5% down payment which I think is too low.
You and I went through the same thing.. It took us 12-15x of getting out bid before we landed our foreclosure.. Sometimes it just takes time to get the deal done.
“The economy receives zero stimulation for the purchase of a foreclosed home because all of the funds go back to the lender…” <—I didn't know that!
I've never purchased a foreclosure property, but I've thought about it. I think I would be good at flipping a house, but I'm not in a place financially to even think about that now. When I get there, I'm not sure I'd be willing to take the risk either. HGTV just makes it look so easy and fun, though!
I have no problem buying foreclosures (my 1st home was a foreclosure) or distressed properties (all my rentals are either foreclosures or distressed properties) but I’m petrified of flipping. That’s a beast I have yet to tackle and probably will not ever flip a property.
I’ve never bought a foreclosed home. We thought about it for a second when we were looking, but the foreclosure process takes a long time to close, whereas we needed a place ASAP.
I would say it depends. I was able to close on my first home within 30 days. The banks usually are quicker to move than people. Now.. short sales definitely take a longer time.
I just wanted to let you know, if you haven’t already, I nominated you for the Versatile Blogger Award. 🙂 You can check it out here :http://iwtkangaroo.wordpress.com/2012/07/10/choosing-an-australian-bank-account/
Aww.. you got me all excited. I though you were talking about me 🙁
I didn’t know this tool existed, but I can see your point on how it doesn’t help anyone but Fannie Mae.
Hell yea.. it doesn’t help anyone except existing home owners who are not selling anyway, the banks and Fannie Mae. New buyers are locked out of the game and have to deal with the harsh reality that markets aren’t free /
Were currently selling our home and it does make it a nightmare when there are so many foreclosures around! Everyone thinks you should be dropping the asking price by 15% to compete but that’s just not realistic.
Hmm.. The price of the house is only worth what someone will buy it for.
That’s true. I’m not saying the offers being made aren’t realistic or in keeping with current market conditions, they are. If you need to hit a certain figure to make the move work though then you can’t compete with forclosures.
Gotcha! Any reason why you didn’t sell the place earlier or at peak?
When we were looking to buy, we looked closely at forclosures. We ultimately didn’t go with one, but they were definately on the table.
It could be argued that helping Fannie Mae out helps the economy with a trickle-down argument.
Edward,
I’m not sure how helping Fannie Mae prop up the housing market helps anyone. Existing homeowners pay in the form of higher taxes, new home owners are locked out the market. I personally don’t believe in trickle down economics
The more money a government sponsored company makes, the less the government has to pay to prop them up. Hence, “lower taxes” (down the road in the form of less debt-repayment most likely.
I don’t get how new home owners are locked out of the market by somebody buying a government owned forclosure with a government issued loan.
I’m not sure how you get lower taxes out of this. The taxes will be higher at hte local/state level via the real estate taxes and fees. Secondly new home owners are locked out the market because home prices are manipulated to be higher instead of being set by supply and demand. For example, during the boom when prices kept going up and up.. I was locked out the market b/c every Tom dick and harry could get a loan and it made prices sky rocket. Now that lending has eased, the same people who could not afford to get in during the boom can’t get in now b/c they have to actually qualify for the loans based on income and ability to pay. The only people who are happy are existing homeowners who didn’t plan to sell or people who are selling right now, since they get to keep the paper value of their home.
Fannie and Freddie are also government sponsered entities.. they are not federal entities they are like corporations who was closely related to the government. During the boom they chased profits and got into a bit of trouble so they were put under conservatorship in 2008. These guys perpetuated the housing crisis and cost tax payers some serious coin. It might be best for them to go away and let government get out of the business of property/mortgages. But that will be political suicide since we all know home owners vote 🙂
I bought a short sale… and still live in it now. I expect to keep it for now and rent it out when I eventually get a bigger house.
I tried a few short sales, but the process took a very very long time. How long did it take you to close on your short sale?
We were tempted to buy a foreclosed home for our first purchase but (in Canada) the stress of mysterious sealed offers and court dates put us off.
What is a mysterious sealed offer? How would court dates affect you in purchasing a foreclosure?
The guy that wrote this is a true nutcase. When a bank makes money it creates a safer world for all . Also if they dont sell these properties they will fall to the ground and what will that do for values. Also have you ever offered on a Homepath home? Fannis is darn good at getting more then the actual comp value or market value . The best way to increase values down the road is sell all the foreclosures and then let the market ramp slowly Plus remember a home is to live in not an investment .
I am a realtor in So. Orange County, and I have to concur with the comment regarding Fannie Mae artificially inflating value. I have a signed contract from a seller on a short sale, that the investor is Fannnie Mae. They have done 2 BPO’s (Broker Price Opinion)Original list price at time of the offer submission was 285-295K. Our offer was 280K, after doing research, the going market price is 272-290K for this area. The investor came back an is stating market value is 353K. 4 mos. prior was they said it was 315K and at that time it was valued at 275k. Seller and list agent agree with value, however can not overcome Fannie mae’s value. Any suggestions how to overcome unrealistic inflated values? I hear that Fannie Mae does this to force foreclosure, and then offer the home on thier Homepath.com website. Trying to get someone to purchase it at higher price and offer 3% down at higher payments and mortgage insurance.
Please help shed some light on this very unethical practice. Thanks
Here in MI banks are getting 10 to 20% less than what they bought it back for. A lot of these Fannie Mae homes need a lot of work but financing is avalaible to those who qualify. banks do not want the liability nor the responsibility of these homes and they sell within a week here.