Archive for tag Fannie mae
March 28, 2011 at 12:00 AM · Posted under Glenn Hanon
Do you remember those heady days back a few years ago when your then neighbor turned-real-estate-investor, would buy a house with almost nothing down, then borrow money to renovate the house? Shortly after the renovations were complete they would flip the house—a new term in real estate was born, Flippers. Ahh those were the days… (Said with tongue firmly in cheek) Now with the real estate bust in full swing, the past sins are what many are blaming on the decline of our real estate values. Today if you want to buy a home and borrow to renovate that home you are out of luck, right? Not so. Guess who is offering 100% financing or little to nothing down, NO appraisals required and will actually lend you money to fix the house? Some subprime lender who charges tons of points? Some fly by night organization? No. Sorry you are wrong; it is good ol’ Uncle Sam. Yup Fannie Mae, you might have heard of them lately, like this article in the WSJ regarding Fannies interpretation of subprime loans. Today Fannie is offering such a risky program to purchase their distressed inventory through a program called Home Path. BUYER BEWARE there are gimmicks and tricks with loans and programs like this. Here are some things to be wary of:
- Low down payments only hurt the borrower and surrounding neighbors. If you default on a home path loan because you got in over your head, we just don’t need another foreclosure.
- Watch for hidden closing costs. Generally these low down payment deals come with several thousand dollar price tags for points—in other words a rip off
- What are the conditions that you have to meet in order to qualify for the loan
- Is there an appraisal required? Some of the Home Path loans do not require appraisals! Hmmm… sounds a lot like 2004 before the bubble popped
- Buyer Beware as to the condition. There are no warranties or disclosures. Inspections should be mandatory if you are a buyer.
- You need an attorney. Some of the forms with this type of program will be on state approved contracts and others will not. Your Wisconsin Real Estate professional cannot interpret forms that are not approved by the state. It is the law. Hire counsel!
Use extra caution when engaging in these types of programs. Get lots of information before you commit and please seek good real estate advice regarding the price of the home in the area you are purchasing. Why am I so opposed to this program? Because the ‘fix’ that the government is using to liquidate the thousands upon thousands of bank owned properties will not fix the problem. The crisis we are facing now is that some homeowners feel that it is okay to walk away from their mortgage because they are not heavily invested in the property. This program perpetuates this conundrum. Home Path will attract responsible home buyers, there is no doubt. But it will also attract many who simply should not be in a home at this time, plus the government will assist them in adding to their debt! If this was happening in the private sector the Feds would frog march these charlatans in front of the world to see what loathsome, seedy characters are still preying on the public. The second reason I think this is inequitable is that only the government can offer this type of program, while the regulators are constantly peering over the shoulder of private banks to see if they are being good stewards with their money. The hypocrisy is startling and frightening. What Fannie is doing with this program is just shifting the monthly debt service to a consumer rather than the taxpayer. But if Fannie were to discount the property and require that the borrower use 20% of their own money then the true shift in debt obligation would shift from the taxpayer to the consumer, where it should be. Remember when this was a good idea?
Posted by: 
Glenn Hanon
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February 15, 2010 at 01:20 PM
I just read an excerpt from an interview of executives from two large real estate firms in the United States; – the same day I attended our company Awards Breakfast at which we were treated to an update by Steve Harney, my “main man” when it comes to getting up to date information on what’s happening in the real estate economy. Guess what! The messages are in direct conflict about the future role of the Federal government in the housing market. It’s no wonder buyers and sellers find it difficult to predict what’s going to happen!
A little background – banks can sell their mortgages on the secondary market to Fannie Mae and Freddie Mac. The mortgages are then “bundled” and sold to private investors. In the past, these investments were very secure, but with so many homeowners’ currently in default and foreclosure, fewer investors want to risk their money on mortgage backed securities. To take the risk, investors want more interest. The Treasury Department and the Federal Reserve Board are purchasing these securities from Fannie Mae and Freddie Mac, the goal being to free up money and maintain lower interest rates so that buyers can get mortgage financing. According to the real estate executives in the interview, the Treasury Department is prepared to continue financial support to Fannie Mae and Freddie Mac for at least the next three years. Furthermore, the government is prepared to be involved in the housing industry for as long as it takes to keep the economy moving in the right direction. On the other hand, Steve Harney has stated that the contributions from the government to Fannie and Freddie have just about reached the levels committed to, and that after March 31st, the government may back off and allow the mortgage markets to adjust independent of government intervention. Furthermore, Harney commented that the President only briefly mentioned the real estate market in his latest address, indicating that the administration intends to turn its focus away from the housing market.
Both the executives interviewed and Steve Harney agree that less involvement by the Feds will most likely mean a rise in interest rates. According to the executives, a 1% increase in interest rates will hardly be felt in the real estate industry as a whole and is not enough to slow down sales, given that home prices are still low. Steve Harney takes the view of the CONSUMER. A 1% increase in interest rates has a large impact on buying power, translating into a higher monthly cost for the same home. In other words, higher interest rates mean YOU will get less “bang for your buck.
Posted by:
Cathy Butschke
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May 22, 2009 at 07:49 PM
If you are like me, you are finding that things are happening very fast in the world of economic bail outs. If you are a homeowner and struggling to stay above water, there is a new program out there that you may benefit from: Home Affordable Modification. The name doesn’t just roll off the tongue; a condition reflected in the guidelines. It’s not easy to determine who – or who doesn’t – qualify for modification, but perhaps there might be a glimmer of hope for those staring down the slippery slope of default, bankruptcy and foreclosure.
Home Affordable Modification is specifically designed to help homeowner’s with Fannie Mae and Freddie Mac backed mortgages, though other mortgages may qualify. See what I mean about clarity? In any case, this may be the answer for you if the following describes your situation:
I. You are spending more than 31% of your pre-tax income on housing
AND
II. A major change has occurred in your life which impacts your financial situation. The result of this change has put you in danger of default on your mortgage, or has already resulted in delinquent payments.
If this describes your situation, CALL YOUR LOAN SERVICER!
Even if you are already being foreclosed on, or have already declared bankruptcy, you may still qualify for modification. It’s certainly worth the phone call. Be ready to provide proof of your hardship, and documentation of income and housing expenses. Oh – and be prepared for a LONG wait on the phone. Loan servicers are being flooded with phone calls.
For more information and greater detail on the Home Affordable Modification plan, check out my source: http://www.Bankrate.com.
Posted By:
Cathy Butschke
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