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A policy change was announced last Wednesday by the Federal Housing Finance Agency (FHFA) allowing Fannie Mae and Freddie Mac to sell existing REO properties at fair market price to any qualified buyer to be determined by the companies.
The new policy only applies to single-family REO inventory of Fannie Mae and Freddie Mac, which according to FHFA are currently 121,000 properties with the two GSEs inventories combined.
In the past, Fannie Mae and Freddie Mac require homeowners or third parties buying the property in behalf of the homeowner to pay the entire amount owed on the mortgage in order to purchase back the house after a foreclosure. However, with this newest directive from the FHFA, homeowners or the third parties representing them are now allowed to purchase back the property under a fair market policy, which as well applies to those buying other REO properties.
“This is a targeted, but important policy change that should help reduce property vacancies and stabilize home values and neighborhoods,” said Melvin L. Watt, Director of FHFA. “It expands the number of potential buyers of REO properties and is consistent with the Enterprises’ practice of requiring fair-market value for those properties.”
Furthermore, the current rules of both GSEs necessitate the former homeowners to wait a minimum of three years following a foreclosure to be eligible for another GSE-guaranteed loan. Aside from this, the rules of the GSE also require that the previous owner uses the property as his or her principal residence.
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