Fannie Mae and Freddie Mac

Learn How to Take Advantage of Fannie Mae Foreclosures & Freddie

Mac foreclosures

 

A Brief History – Fannie Mae

•Originally established in 1938 as a government-sponsored enterprise (GSE) under President Roosevelt’s New Deal package, the Federal National Mortgage Association (FNMA, or Fannie Mae) sought to expand the secondary mortgage market 

• In 1968, Fannie Mae converted to a publically traded company yet retained its government backing which gave it an edge over other private mortgage companies in the industry

A Brief History – Fannie Mae

A Brief History – Fannie Mae

• Fannie Mae’s government backed loan guarantees and its ability to borrow at much lower interest rates drew investors and meant that it could buy the mortgages of foreclosed properties and other mortgages from commercial lenders in bulk allowing for more available and affordable housing

A Brief History – Freddie Mac

• Freddie Mac was created in 1970 in order to provide Fannie Mae with competition

 • Also created as a GSE,

Freddie Mac enjoyed the benefits of government backing and borrowing at low interest rates

Providing the American Dream

• From 1970 onward, the secondary mortgage market was dominated by Fannie Mae & Freddie Mac  

• As of 2008 and the beginning of the housing collapse and foreclosure crisis, Fannie Mae & Freddie Mac together owned or guaranteed roughly half of the country’s mortgage market worth $12 trillion

• In September of 2008, both Fannie Mae & Freddie Mac were placed into conservatorship by the U.S. Treasury Department

 • These organizations are now under

the supervision of the FHFA, or Federal Housing Finance Agency

 • Fannie Mae & Freddie Mac are now

run much like HUD

Recent Changes

Great Deals on Foreclosed Properties

• Taking advantage of Freddie Mac & Fannie Mae foreclosures is an excellent way to attain great deals and save money on foreclosure homes and properties

 • Savings of up to 50% of a

home’s appraised value are common and these great deals are available to anyone

How It Works

• Most homes which Fannie Mae & Freddie Mac have participated on revert back to them when foreclosed upon

• Their foreclosed homes are then turned over to real estate agents who provide a “Broker’s Price Opinion” and repair recommendations

• Certified appraisers provide valuations of the properties

• The properties are placed on the market via a silent auction

• These properties can be difficult to locate, therefore listing services are the best ways in which to find these great offers

 • Listing services allow you to browse,

cull and prioritize potential interests

 • Because many listing services contain

up-to-date information on foreclosure sales, an advantage can be gained in locating fast selling properties

Fannie Mae & Freddie Mac Properties

Preparing to Buy Foreclosure Properties

• Narrow down your listings to a few selections

 

• Obtain as much information on the properties and their sales as possible

Preparing to Buy Foreclosure Properties

• Visit the properties and assess their conditions

 • Note any additional costs for

repairs and add these amounts to the expected sale prices

• Submit a written bid on the property via a qualified real estate agent

The Bottom Line

• Maximize the profit cushion between what is paid for the property and the appraised value of the property on the open market, minus estimated repair costs

What’s Required From Buyers

• A pre-qualification letter from a reputable lender

 

• A filled out and signed Offer to Purchase contract

What’s Required From Buyers

• Fannie Mae & Freddie Mac’s own Purchase Addendum must be included

 • The Offer to Purchase must contain

language stating that the Purchase Addendum is part of the contract

 

 • The Addendum’s directions must

be signed by the buyer as well as the buyer’s agent

• The Purchase Addendum is a legal documentation which presents parameters and guidelines to purchasers of their properties

 • Basically, the Addendum states

that a property is purchased “As Is”, protecting the institutions from any future issues which may arise concerning the condition of the home

What The Purchase Addendum Is

Purchase Addendum Outlines

• The Addendum also provides instructions to both individual home buyers and investors 

• Initial offers should be submitted in writing • Once a selling price is agreed upon, the

buyer must complete inspection and respond back within 10 days. If the buyer accepts the property, the process continues “Under Contract” 

• Although cash payments are preferred, Fannie Mae & Freddie Mac also consider other payment options

• Purchase requirements are slightly different for investors

 

• 10% of the purchase price is to be set in earnest funds at the time of offer

Special Requirement For Investors

• A Deed Restriction is placed on the property which states that for three months after purchase the buyer cannot resale the property for more than 120% of the purchase price

Special Requirement For Investors

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