Help From Fannie and Freddie Programs for Repossessed Properties

Home buyers usually do not get much aide with their home loan financing. In fact, they are generally happy just to get a California home loan. At least one group of borrowers, though, were offered some relief. Fannie Mae and Freddie Mac, the government-controlled companies that purchase home loans from banks in bulk, have offered financing incentives for buyers of foreclosed homes that Fannie and Freddie own in California and across the USA. Home buyers had until Oct. 30 to apply to take part in 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.

Freddie Mac’s program, was created on July 17, 2009. The program was designed by Freddie Mac in an attempt to aide home buyers with their closing cost expenses. With the program, Freddie Mac offers to pay up to 3.5 percent or the actual closing costs, whichever is lower for owner-occupied homes. Owner occupied cash sale homes can receive up to 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 primary residence and must be chosen from 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 markets a nationwide selection of homes that Freddie Mac owns. The program also includes a comprehensive two-year home warranty on HomeSteps homes. 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 to buyers, 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 payments equivalent to 3.75 percent of the home loan value. Until June, Fannie Mae also offered to pay for home repairs during the borrower’s first six months in the home, up to $3,000. Now, Fannie Mae is considering whether to renew, or change, that program. Also, in highly impacted areas by the economic downturn who qualify for a loan through the National Stabilization Program, Fannie Mae is considering a 15% discount on those properties. Most 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 Freddie Mac program is viewed by some industry observers as an effective partnership between Freddie Mac and local real estate agents who market the homes. The program is essentially for people who have no qualms about purchasing a foreclosed 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 nation, with nearly half of this total in California. The HomeSteps-Smart Buy and Fannie Mae programs are considered 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 foreclosed properties. However, the program has not been a total success and the large home loan fund providers are looking for more deals before the financial assistance expires.

California Home Mortgage Services by SD Mortgage Group. Our 58 years of experience in California home mortgages make us your best home finance option.

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