Time To Buy An REO? New Policy by Fannie Mae Could Help!

Are you in the market for a bank owned property?  Have you tried in the past to get in on a deal, only to be stuck in an eternal timeline of paperwork and waiting on the bank for answers?  Well, mortgage giant Fannie Mae is unhappy about the mounting thousands of REO houses it’s stuck with and is now moving to sell off that inventory faster than it has in the past, potentially opening up some interesting opportunities for home buyers and their agents.

In a new policy announcement, Fannie says it will now accept purchase offers for its REO immediately after listing, without notifying lenders or mortgage servicers whose loan files are under review.

Under its previous policy, Fannie gave lenders and servicers fifteen days to find a better purchase offer for new REO they sent to the company following foreclosure.

That policy affected all repossessions where Fannie demanded the loan file on the house – potentially exposing errors in underwriting or servicing, and requiring reimbursement for losses by the lender.

But that policy also had a negative impact on Fannie’s ability to move its REO ‘s out the door quickly. The fifteen day time-out slowed down the works – and sometimes kept properties out of reach of ready and willing buyers.

Partly as a result, Fannie’s portfolio of unsold acquired real estate has been ballooning lately. According to its most recent securities filing, the company, now under federal control, took in more than 98,000 properties following foreclosures during the first three quarters of 2009.

During the same time, it sold about 90,000 houses.

But because of a widening imbalance of REO in and out the door dating to prior years, Fannie was sitting with 72,000 unsold houses — about a 7 percent jump from the same period the year before.

Fannie’s response to this REO bloat? Sell off the houses faster by accepting purchase offers through its network of real estate listing agents earlier.

In the company’s memo to lenders and servicers, it basically said this: We’re now going to market houses as soon as they come in the door and we’ve established a current value.

No more fifteen day time out period for lenders whose REO we’ve selected for loan file reviews.

As soon as Fannie lists an REO property, it will be fair game for home buyers. And if Fannie ultimately sells for a loss — and the loan file review turns up bad underwriting or other problems — Fannie plans to stick the lender with the loss.

Bottom line for home buyers and agents under the policy change: Look for earlier access to REO properties, and earlier decisions on purchase offers.

Fannie is determined to slim down its REO portfolio in 2010, and that just might provide opportunities for heads-up buyers and agents looking for deals.

If this is of interest to you, let me know.