Fannie Mae Offers Incentives to Buy Foreclosed Homes

In an attempt to knock down its rising stockpile of foreclosed properties, mortgage finance company Fannie Mae is now offering incentives to both buyers and real estate agents who take these homes off the market.

For eligible properties, the government-run entity will give homebuyers up to 3.5 percent of the purchase price for closing costs, as long as they plan to live in the home, not rent it or flip it. What’s more, buyers could be eligible for mortgage and renovation financing, which gives them the opportunity to pay just a 3 percent down payment.

The agents representing these buyers can qualify for a $1,200 bonus – no small prize during this down market. Agents can submit initial offers beginning June 14 and must close by Oct. 31, 2011.

Fannie is specifically try to energize owner-occupants, not investors, because it wants to contribute to the integrity of the nation’s neighborhoods.

“By encouraging homebuyers who will make these properties their long-term home, these expanded incentives will help to stabilize communities,” said Ed Neill, senior vice president for Credit Loss Management at Fannie Mae as quoted in a BusinessWeek article.

Obviously, for Fannie Mae and sister company Freddie Mac, working through their large inventory of foreclosed properties is high priority. These are a drag on their portfolios and until they are whittled down, home prices will continue to fall, which in turn prevents the housing market from making a recovery.

Yet critics worry that by turning its back on investors and trying to attract buyers with little cash, Fannie Mae might be adding risk to the already floundering market. To this point, investors have been a driving force in the meager sales of the past few months, and according to ForeclosureRadar CEO Sean O’Toole (as quoted in a CNBC article) its better to let distressed properties go to investors than let them sit with banks for months, as is likely to happen if investors get pushed out.

“Investors far better fill this need then banks, who put little into cleaning up their properties before sale, or non-distressed homeowners, who are often not motivated to sell at prices homebuyers can now realistically afford,” he added.

Essentially critics are saying that by trying to bypass investors, sales may slow even further, and it may take twice as long to eliminate the hundreds of thousands of foreclosed properties that are currently on Fannie’s books. I guess we’ll see.

One Response to “Fannie Mae Offers Incentives to Buy Foreclosed Homes”

1. Rebecka says:

   November 17, 2011 at 6:02 pm

   I coincide with your thought.Thank you concerning your sharing.