Assistance From Fannie and Freddie Programs for Repossessed Homes
Home buyers usually do not get much aide with their mortgage financing. In fact, they are generally happy just to get a California home loan. At least one group of borrowers, though, have gotten a break. Fannie Mae and Freddie Mac, the government-controlled companies that purchase home loans from banks in bulk, have offered financing incentives for buyers of defaulted homes that Fannie and Freddie own in California and across the USA. Home buyers had until Oct. 30 to apply to take advantage of Freddie Mac’s SmartBuy program, which began in July and offered as much as 3.5 percent of a home’s sale price to help cover closing costs.
The HomeSteps-SmartBuy program, was created on July 17, 2009. The program was designed by Freddie Mac in an attempt to aide families buying a home with their closing cost expenses. Under the program, the mortgage giant offers to pay as much as 3.5 percent or the actual closing costs, whichever is lower for owner-occupied homes. Owner occupied cash sale homes can receive as much as 1 percent for closing costs through the SmartBuy program. Investors, however, are not eligible for this program. To qualify for the mortgage relief program, the home must be a principal residence and must be processed through the foreclosed property section of Freddie Mac’s HomeSteps Web site. Also, loans must close by year’s end. As an added bonus, the HomeSteps properties also include two-year warranties on major appliances and electrical, plumbing, air-conditioning and heating systems. HomeSteps is the real estate sales unit of Freddie Mac and is focussed on selling homes that Freddie Mac owns. The program also includes a comprehensive two-year home warranty on HomeSteps properties. Although the closing cost offer has already expired, the warranty is ongoing.
Fannie Mae’s program was more aggressive than Freddie Mac with the incentives they offered. Through participating lenders, Fannie offered mortgages to buyers who made a down payment of 3 percent, and these buyers were not required to secure private mortgage insurance. Fannie Mae also offered closing cost assistance like Freddie Mac, as long as they negotiate for it. But, unlike Freddie Mac’s, Fannie’s assistance level was not capped. Under the program, the average homeowner has received help as much as 3.75 percent of the home loan value. Until June, Fannie Mae also offered to cover any repairs to the home during the borrower’s first half year in the home, up to $3,000. Now, Fannie Mae is considering renewing or changing that program. Also, in highly impacted areas by the economic downturn that have qualified for federal financing through the National Stabilization Program, Fannie Mae is considering a 15% discount on those properties. The majority of Fannie Mae’s foreclosure incentives are offered to buyers who will use the home as their primary residence, or so-called public entities like Neighborhood Housing Services and other organizations that rehabilitate properties and sell them to owner-occupants.
The HomeSteps program is seen by many industry experts as an effective partnership between Freddie Mac and local real estate agents who market the homes. The program is essentially for people who are okay and comfortable with purchasing a repossessed home. The good news is that these homes are usually in good enough shape to move into immediately. HomeSteps has about 20,000 properties across the country, with nearly half of this total in California. The HomeSteps-Smart Buy and Fannie Mae programs are believed to be a win/win for both Freddie Mac and assisted home buyers. The programs help home buyers get financing for home loans; and at the same time it helps Fannie and Freddie sell off some of its repossessed homes. However, the program has had it’s failures and the large mortgage fund providers are looking for more deals before the financial assistance expires.
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