John Beckett's Real Estate Blog

Americans who are brave enough to buy a home despite persistent predictions of a double dip in housing may want to contact the federal government, as the recession and financial crisis have turned Uncle Sam into one of the largest owners of real estate in the United States.

Rising foreclosures

The housing bust has led to an unprecedented number of foreclosures in the U.S. In May, 322,920 foreclosure notices were filed against homeowners, and more than 3 million homes have been seized over the last five years from delinquent borrowers. While most homebuyers may assume that banks are the only source of foreclosures, the U.S. government also owns many residential properties because of its role in buying and guaranteeing mortgages. Many of these properties are held because of the conservatorship established in 2008 over the government-sponsored enterprises popularly known as Freddie Mac and Fannie Mae.

Freddie Mac

The Federal Home Loan Corp., or Freddie Mac, owned approximately 45,000 multifamily and single-family homes at the end of 2009. The company put a gross value on these properties of $5.13 billion. Freddie Mac obtained these properties by being the highest bidder at foreclosure auctions when the properties were used as collateral for loans owned by the company, or when owners just transferred the property to Freddie Mac without going through foreclosure. Freddie Mac is furiously attempting to dispose of these homes, and has been fairly successful; the company’s average holding period for real estate is less than one year. The company markets the homes through HomeSteps, where buyers can search by state and city.

Fannie Mae

The Federal National Mortgage Association, or Fannie Mae, is also a large owner of foreclosed property. The company owned more than 86,000 single-family homes at the end of 2009, with a value of $8.5 billion. These homes are concentrated in states that were ground zero of the housing bust, with 28% of its inventory in California, Nevada, Arizona and Florida. Fannie Mae also markets these homes intensively, and sold 123,000 in 2009. The company’s official website to sell homes is called HomePath, where buyers can look up inventory near their location.

Other agencies

Another source of homes owned by the government is the Department of Housing and Urban Development. HUD obtains its properties through foreclosure auctions on Federal Housing Administration-insured loans. HUD has a website at hud.gov Next up is the Federal Deposit Insurance Corp., which owns its inventory through its role in seizing failed banks. The FDIC owns single-family homes but also has a large number of other properties, including industrial and commercial properties and raw land. The Veterans Affairs Department and the Agriculture Department also play roles in financing and guaranteeing home loans, so both own single-family home and other properties. Buyers can look for their dream home through these agencies as well.

Buyer beware

Buyers shopping for homes from the government should be aware of the disadvantages of the process.  Many agencies offer properties “as is,” with no warranties on their condition. There is also little flexibility on negotiating the terms of the contract if the government accepts your offer. Fannie Mae, for example, does not accept offers for houses that are contingent on a buyer selling a currently owned home.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=24796144

A new federal program, Home Affordable Foreclosure Alternatives, encourages banks to accept short sales by offering them financial incentives to do so. It offers sellers incentives, too.

Homeowners win because:

• They won’t get stuck with a deficiency judgment. Under the program, homeowners are released from all obligations.

• They can receive $3,000 in relocation expenses.

• They can’t be charged any fees to participate.

Creditors win, too, because they don’t inherit a vacant home to maintain. As big as the losses in short sales can be, the losses from foreclosure can be even bigger — by some estimates, as much as 60% of what’s owed on the mortgage.

Secondary lenders, who often stand to get nothing in foreclosures, can receive up to $6,000.

You may qualify for the foreclosure-alternatives program if:

• You have tried unsuccessfully to get a mortgage modification through the Home Affordable Modification Program.

• The property is your principal residence.

• You got your first mortgage loan before Jan.1, 2009.

• You are behind on your mortgage or will be in the foreseeable future.

• You owe no more than $729,750.

• Your total monthly mortgage payment is more than 31% of your income before taxes.

The foreclosure-alternatives program is set to expire Dec. 31, 2012. Some critics predict that it will be as disappointing as the loan-modification program, which was launched in March 2009. Out of millions of distressed homeowners, just 170,000 had received permanent modifications as of the end of February, according to the Department of the Treasury and HUD. (Many more modifications are being offered or are in the trial phases.) The median decline in monthly mortgage payment was about $500.

Will the new program be any better?

“It’s half right,” says Mary Tootikian, the author of “Stunned in America: Sub-Crime Mortgage Crisis.” “The intent of it is good.”

She worries, however, that the new program’s application process will allow lenders to find out borrowers’ incomes and assets. “After they go through this fact-finding mission and they find out you have assets to go after, they don’t have to let you do a short sale,” she says.

Arian-Pace, the Florida attorney, is more optimistic. “The frustration of short sales is the timing of it all, getting banks to approve it,” she says. “You often lose the buyer in the process. I’m hoping it’s a step in the right direction. Really, it’s going to come down to how the banks implement it.”

Read entire article at: http://articles.moneycentral.msn.com/Banking/HomeFinancing/short-sales-are-the-new-foreclosure.aspx?page=2