Is It Time To Shut Down Fannie Mae and Freddie Mac?
Fannie Mae and Freddie Mac have been government backed far too long.
They have already cost the taxpayers $187 Billion in their bailout.
There are members of Congress who are calling for the phasing out of Fannie and Freddie. They are saying that the private sector should be the ones involved with mortgage loans for homebuyers. I agree. And surprisingly, President Obama agrees.
President Obama said: “For too long, these companies were allowed to make huge profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag,” Obama said of Fannie and Freddie. “Private capital should take a bigger role in the mortgage market — I know that sounds confusing to folks who call me a socialist.”
Of course many in the mortgage industry and I am sure that special interest groups in the housing industry are not in agreement. Even though we are in the business of real estate there are principles that are more important to us than our special interests. The main principle of free markets and free enterprise is paramount to a healthy economic environment. I vote first as an American before I vote as a REALTOR®.
Many people on both sides of the isle agree that the mortgage industry should be in the hands of the private sector and that government should not be involved with making loans or guaranteeing mortgage loans and that Freddie and Fannie expose great risk to taxpayers.
Last month a bill was passed that would end Fannie Mae and Freddie Mac. A committee spokesman from Congress said Tuesday that their bill would end “the largest bailout in history”, This would also phase out the government’s role in housing finance, thereby giving consumers more choices when shopping for mortgage products.
It is time for Fannie and Freddie to be phased out over the next five years.
Fannie Mae Artificially Inflating Home Values???? Could it Possibly Be????
Does anyone learn from past mistakes? Does this sound at all familiar to any of us who here in the real estate boom and then the bust???
It appears that Fannie Mae is creating their own values through their Homepath program and through their outrageously laughable counter offers to short sales!
This is market manipulation. This is one of the reasons the real estate market crashed. So is anyone going to learn from the mistakes of the past? Or are they bound to repeat them?
When we list a short sale we make sure to market the property at the fair market value according to comps. All agents should know how to do this.
But Fannie Mae took away delegation authority of appraisals from the servicers and orders their own values. Let’s say we have a short sale that is listed at $189,000. How did we come up with that price?
Well, we take into consideration the solds in that neighborhood of similar properties and we make adjustments to those sold properties based on condition of the property, pool or no pool, lake view or no lake view, etc. That determines the price.
Once a buyer puts in their offer which will most likely in our market be full price at $189,000 we begin the negotiations on the short sale. If the investor on the property is Fannie Mae, they order a BPO on the property.
But the Fannie Mae counter offer comes back at $263,542!!!!!! How did that happen???? Well, ordinarily we would blame the BPO agent whom Fannie Mae ordered the BPO from.
Well, don’t attack the BPO agent so fast!!!
Agents that we know have found out from some of these BPO agents that they were TOLD by Fannie Mae what price to come back with!!!! WTH!!!!!???!!!!
Does this sound familiar to any of you who were in the real estate market back in 2005 and 2006????
Remember the mortgage brokers, lenders and banks were ordering appraisals from their buddies who would come back with appraisals of inflated values? That is why the government decided they needed to make more appraisal regulations. Those regulations included keeping the agents and mortgage brokers away from the appraisers ears. But we know that regulations always have unintended consequences because they are mostly made in haste without much though or sense.
Fannie Mae, according to agents around the country, are telling the appraisers and BPO agents to NOT take ANY short sales or REOs into consideration in their values. So let us get this straight… you have a short sale listing and Fannie Mae does not want that short sale listing to be compared to any closed short sales???? A short sale is a short sale is a short sale…
The average out of whack counter values are about $60,000 difference between list price and appraisal price by Fannie Mae. Fannie Mae is apparently dictating the market values. There just are not that many listing agents and brokers around the country that are 60K off all the time!
Fannie Mae does not want to do short sales and they have made this very clear through purposely inflating the values of the homes. They know darn well that even if the buyer accepts their outrageous counter offers the buyer’s lender is going to order an appraisal and that appraisal will reflect the real market value and the buyer will not be able to get the loan unless they are paying cash for the property.
So when the deals fall apart…. Fannie Mae gets to take the property back into their asset column, cook their books some more and then offer the property up for sale through their Homepath program which guess what!!!! DOES NOT REQUIRE AN APPRAISAL!!!!!!
Now, our next question becomes…. once that inflated market value loan is closed, do the appraisals moving forward on traditional sales and non Fannie Mae short sales reflect those inflated values? Most of the time the appraisers call us and ask us the details on our closed sales when they are evaluating the market value of a property.
Fannie Mae gets to make up its own rules.
Here we go…. again….