Fannie Mae slipped out a press release just before the Thanksgiving Holiday announcing their new “First Look” Initiative. Under the guise of neighborhood stabilization the program gives home buyers (those who plan to live in the home themselves) and public entities the first shot at buying any Fannie Mae REO’s — investors are locked out unless Fannie does not receive an acceptable offer within the first 15 days.
On first blush, this seems positive. Afterall, owner occupied homes should in theory be better taken care of which is good for neighborhoods, and public entities are using our money to buy so why make them compete with investors.
Let’s not forget though that Fannie loans are backed with “our” money as the loans from these entities have an implicit, if not explicit, guarantee from the federal government (this point could have been argued until we took them under conservatorship in 2008 – now I think their losses are unquestionably our losses). As such, I’d think our goal should be to limit Fannie’s losses, not limit competition to help certain buyers over others.
There’s no question this program could provide some relief to folks trying to buy a home to live in. We regularly hear about home buyers losing offer after offer to all-cash investors willing to pay prices not only over asking, but above appraisal value. An incredible fact given that we have a record number of homeowners facing foreclosure, and had exploding supply a year earlier. Just keep in mind that we only have this feverish battle right now because the government has worked hard to artificially limit supply, and artificially pump demand. So I have a simple question: is the problem that the real estate market is so slow that we need to stimulate it with low interest rates and tax credits, or is the market so hot that we need to protect home buyers from competition?
What I find even harder to understand is why this “First Look” program extends to public entities. As you may recall the government launched a number of programs to buy up foreclosures in an effort to limit their impact on neighborhoods. The theory at the time was that there would be far more foreclosures then there would be traditional buyers (homeowners and investors), and that these programs would help clean up the extra supply. But that is not the way it played out.
Instead we now have these programs competing for homes at a time when there simply is not enough supply for current demand (not unusual to see 10+ offers on a clean REO in California right now). As such it makes no sense for these public entities to use taxpayer funding to buy foreclosures AT ALL right now, let alone have Fannie limit competition and take a bigger loss (using taxpayer dollars) to allow these public entities to buy them cheaper.
Bigger picture this program probably doesn’t matter much. There are so few REO’s coming to market right now, investors are already giving up on them and moving on to buy at trustee sales (foreclosure auctions). While riskier for inexperienced investors, the trustee sales are true public auctions where anyone with a check can come and compete for these homes before Fannie gets a chance to decide who does, or does not, get the “First Look”.
Another possible benefit of this program might be to limit the amount of unethical/fraudulent behavior on the part of some of these REO listing agents. How many of us have seen our higher offers overlooked in favor of inhouse purchasers who close escrow for far less than our buyers offered to pay?
I’d recommend reporting that to the lender if you ever see it – if the listing agent is not presenting an offer to a bank it is certainly an ethics violation, and it may even by felony bank fraud.
While I understand where you are coming from I personally think this program is more likely to increase this type of fraud, not decrease it. If the REO agent is really willing to not present offers in favor of in-house offers, why in the world would you think they wouldn’t present their investor offers as owner occupant deals. Or start to lock out your home buyer offers claiming your folks are really investors.
I think we have to deal with fraud by prosecuting it, not by writing up poorly thought through rules that complicate the offer process, limit competition and hurt taxpayers.
Thanks for contributing an interesting take on this.
We offered on a FNMA owned property and agent told us that FNMA will not counter on an offer that is not within 80% of list price. How can I find out if this is true. I have never heard this before and we are investors and have purchased FNMA owned properties. I think the agent may be holding out and not submitting the offer.
And my experience with NSP buyers is that they are given concessions that would not ordinarily be available to homeowner buyers. And, the NSP buyers are simply flipping the properties for a fast profit.
This is an example of the reason why we are in this mess. The government should be encouraging investors making all cash offers in the auction. It’s a win for the government.
Once these speculators start losing money, those properties will be up again on the market at a discount.
Let the free market work.
This is proof of Obama’s goal of “economic justice” though wealth redistribution. Blatantly pushing everyone else aside in favor of those Obama wants to favor.
I wonder how long it will be before the deed restrictions on resale will be added to the mandate? Sean I agree, the banks should be trying to get the most money they can from these homes.
I bid on a property in September and was told my offer was not going to be considered since I was an Investor. The property closed on October 23rd for $72,000 ($3,000) less then what I bid on it. Now on December 4th it’s listed for $125,000.
What recourse do we have? If it went to someone ‘needy’ I can live with that but this makes me sick and is down right stealing.
Here is the property now
http://www.redfin.com/VA/Woodbridge/Undisclosed-address-22191/home/9152119
This is the email I recieved back from the Seller’s Agent regarding my offer in Sept.
“Hello,
Concerning on offer on this property. Please note that Fannie Mae instituted a policy in August, ‘09 that they will only consider offers from Owner Occupants in the first 15 days of a listing. They do not accept any Investor offer submissions during this period and ask that I just hold on to them until after the 15 day period has elapsed in case an Owner Occupant offer is not accepted.
I am sorry for the inconvenience. They also have asked me not to formally post this info in either the listing remark or on my web site.:
I’d have a couple of questions if I were you.
1. Who is the new owner? If it is a public agency, then reselling is fair game under this program.
2. Was this home really part of this program? Note my reply to Tracy above. I think this program is ripe for abuse as it gives agent a free pass to not submit offers. I expect we will have a few bad apples that use this as an excuse to give deals to their friends, whether or not the properties are in the program.
I’d report it to Fannie Mae, and my local U.S. congressman and senator. If the selling agent mis-used the program they should be prosecuted, and even if everything is legit our lawmakers need to know that this isn’t a good use of taxpayer funds.
Here is the info I’ve been able to gather on the property. It doesn’t appear that it was sold to a public agency, the purchaser’s name is Alicia Martini. She paid for the property in cash! Not against the law of course but that seems fishy for a first time homebuyer to do that and then live in the property. Perhaps she is trying to get the first time home-buyer’s tax credit too.
I’ve emailed Fannie Mae and plan on calling the listing agent to see if he is willing to provide any detail before I contact the selling agent. Also since this property is currently for sale I plan on going to see it as well to see what work has been done.
[THE FOLLOWING HAS BEEN EDITED TO REMOVE CONTACT INFO AND PROPRIETARY MLS DATA - ADMIN]
LISTING AGENT/BROKER
Listing Agent: Paul Moravek, Avery-Hess, REALTORS
List Date: 09-Sep-2009 Orig List Price: $67,500
SOLD INFORMATION
Selling/Rental Agent ID: Dewayne Soltes Jr., Century 21 New Millennium
Close Date: 23-Oct-2009 Close Price: $72,000
The houses has now been pulled off of MLS after I spoke to the Selling Agent, who claimed he had no idea. Fannie Mae will call me back in 4 business days at which point this will go no where.
Oh well I tried.
Here’s one for you: My husband and I bid on a house, bidding almost $30,000 over list. FNMA through us in the trash because we were using VA. In an effort to help us, their agent suggested we go through Homepath, which we did. Oh, too bad, so sad… they counter offered with the other potential buyer… we got our Congressman involved and eventually the lawyer for FNMA. They pulled the listing because there was evidence that we were discriminated against. They then claimed we offered the same amount as the other buyer… why the counter offer then? Are they hiding the paper trail? This does not end happily: They raised the price of the property, put it back on the market, we bid even more than before using Homepath, and guess what? No deal. FNMA is corrupt from top to bottom and frankly, they can shove it.
I wanted to provide follow up to my last post.
There is zero oversight for this program, zero enforcement and zero accountability. You should have an intent to be an owner occupant, however if you can sell it at anytime and there is no verification that you don’t currently own a property or ever intend to be an owner occupant.
If you sell with in the first 90 days it should only be sold for 120% of the value property. However after 90 days you can sell it for any amount. But again there is no oversight/enforcement on the program so it shouldn’t matter if you sell it within the first 90 days for what ever you want.
The Fannie Mae level two agent Carlos said I found the ‘loop hole’ in the program.
I will finish writing my congressman and will have to decide the next time I’m faced with this situation whether I check ‘owner occupied’ and make a quick 50k or check investor, loose the property, help support the bailed out company (Fannie) and allow some other ‘deserving’ citizen who is willing to see that this program is a farce and has no teeth.
Here is a deal that seem fishy to me. Would appreciate any info or guidance on what recourse I may have. A house in California is listed at $350 Thousand. The listing agent calls my agent and says that the current offer on the house is having problems and she is concerned that it may fall out of escrow. She finds it odd that the buyer used his uncle (an appraiser) who is in the same office as the loan writer, to submit an appraisal of $300 Thousand. The BPO from the bank (according to the listing agent) was $330 Thousand.
I was then told that selling bank ACCEPTED the $300 Thousand appraisal – which CLEARLY is way under value – and that the buyer suddenly changed lenders so the deal would go through. This was a short sale.
We made an offer the same day the selling Realtor told us of the accepted offer of $300 Th. for $330 Th. with 20 percent down and removing the contingency should any appraisal fall short of the $330 , I would make up the difference in cash.
We were told by the selling agent that the deal is done, and the $350 buyer would get the house for $300 Th.
Something is wrong here . . . .
I really want the house and feel the buyer somehow strong armed the selling bank, or possibly cut the deal by moving their buying loan to the selling bank . . . I can’t quite figure it out.
Suggestions are greatly appreciated. Thanks.
Key statement to me is that you submitted the offer the same day the $300k was “accepted”. If it was accepted there isn’t anything the seller can do they’ve made a contractual commitment to sell. I suppose if they thought they were defrauded in the appraisal they could get out of it, but I’d probably just move on.
I made a full ask all cash offer on a Fannie Mae home recently (as an owner occupant). My agent got a statement from the listing broker stating that there were multiple bids and I had to put in my best and final offer by 3/12.
The listing was posted on the MLS on 3/03, so the last day for “first look” bidders was 3/18.
The listing is still up as “active”.
A) Why did I have to put in my best and final 1 week before the 15 day period ended?
B) How long will it take for me to get a response?
(I’m kicking myself now, because I realize that I could have bid higher as an appraisal will probably not come in higher than the asking price! – Nice loophole that!)
Owner occupied purchasers are allowed to purchase as long as the property has been on MLS for 3 days. First Look doesn’t provide that the property won’t be sold for 16 days, only that an investor’s offer won’t be considered until the property is on MLS for that time period.
When there are multiple offers, the procedure is to ask all of the bidders to submit their highest and best offer. The asset manager responds shortly thereafter.
Lately, asset managers are countering out the appraisal contingency when the offering price is higher than the list price.
today I was told by my realtor that the Fannie May owned property that was on the market for three days when I made my offer was pulled from the MLS on the fourth day and put into an investor portfolio. I thought owner occupants were given the opportunity to bid the first 15 days. I really want to buy this house. I have 5 children and my house burned down. I have the cash to buy the house from the insurance but don’t even know how to do it. This hardly seems fair.
Same sore situation just happened to me in Pigeon Forge, TN. I chose to be honest and acknowledge “investor” when submitting my offer and patiently waiting my 15 days and have now been notified by the agent that another “owner occupant” offer has been accepted.
Come on….this was for a 1-bed/1-bath condo in a highly desirable resort/spa vacation facility, Riverstone.
I have since tried to contact the listing agent, Jeff Schoenfield, thinking he would have more information about this situation. Interestingly, he has not returned my call. By the way, his resume claims he is “top selling agent” in the area for years.
Fact is…price was such a good deal and instant equity was a given that it seems fraud stepped in….
Now, how do I report this fraud…..or does our government even care?
Quite frankly, I see little that you can do. Maybe vote for the Tea Party candidate, write your congressman (must sign affidavit), call Fannie Mae (expect to call then recieve a return call 4 business days later, repeat if you miss their call from ‘Level 2′) or you can join the shared by stating you intend to occupy then changing your mind the day after you close.
It’s shameful that conartists and crooks are given such any easy way to cheat the system.
It
My husband and I bid on a property. The bank then asked for our highest and best bid. It was accepted. It was no secrete that we were not residing on the property. The house is for our daughter, her husband and their 3 children. This process has been going on since May. Last week, we signed the escrow papers, wired the $28,000.00 down payment. Escrow should close at any time. Today, were were told that because we are not owner-occupied and the property was not listed for 14-15 days, we can no longer purchase the propery. If we had been told this information in the beginning, we would have simply looked for another property. Do we have any recourse?