Fannie Mae Firstlook

Fannie Mae Firstlook

The general idea behind the sale of a foreclosed on, or REO, property, is that once the borrower defaults and the bank or other investor becomes the owner of record, that entity should then make the property ready for sale and then, you know, sell it. This is how foreclosures should be handled. Banks are not in the business of owning homes and if we believe this to be true, the procedure from default to foreclosure to re-sale should be swift and decisive. This is how times were and as it turns out, those times were likely better times if buying a foreclosed property was your aim.

I imagine that a slow tightening of list prices for REO homes should be expected. As demand outpaces supply, prices will rise. But in this theory there is just one problem, and that problem is how the pricing of REO property lies today. Prices are increasing on REO listings, reductions are occurring at a slower pace, banks are generally not negotiating as much as they used to, and the supply side of the market is behaving as if demand is, in fact, racing past supply. This is fine that they act like this, but does anyone out there actually believe that demand is somehow beating supply? I see no hands raised. Except for that guy from Michigan, and his hand is always raised for some reason.

A property came to the market last week. It was a decent property, a fine property, for someone. The property was either bank or government owned, I forget which one but that doesn’t matter so much. The price? It was perhaps double what I thought it should have been. This is the new REO, welcome to it. A couple of months ago, a buyer of mine had interest in a property that had just hit the market. It too was bank owned. The price? At least $100,000 more than it was actually worth. Even so, an offer was made and the bank swiftly rejected the offer. It was a reasonable offer. A month or more later the bank hacked $100k+ off of the list price and my buyer came back with the same offer. We now have a deal at the right price, but a month or more after the initial deal should have been struck.

If you have a perception of foreclosures (noun) and it finds such properties as rare values in the market, it’s time we quash that mindset. As banks feel their way through what they hope to be the waning days of an epic housing crisis, they are attempting to stiffen prices and equally their resolve, and bring REO properties to market at higher prices to test the tolerances of the market. I think this tightening is premature, but that’s just me and I’m just a kid with an aging Dell computer. This is what the banks are doing, and what they’re doing is ridiculous but not as ridiculous as what our Federal government is doing.

Fannie Mae, we all know. My daughter’s name is May, and I did not name her after her overbearing, slob of an aunt, Fannie. Fannie Mae is a government entity that is no longer considered a quasi government entity by anyone. It is the government. And as is the case with most governmental agencies it is bloated with regulations and crammed full of silly little programs that purport to somehow help the country or some individuals, though it’s hard to say which. Fannie Mae is the biggest player in the foreclosure market, owning more homes than Larry Ellison and Ekaterina Rybolovleva, combined. Fannie Mae, as a tax payer owned and funded entity, should have one singular goal in their foreclosure efforts: To foreclose on delinquent borrowers and return that property to market as quickly as possible, then to sell for the best market price available, and create a return for you and for me, the taxpayer. This is not what they do.

Firstlook is a program that you likely only know about if you’ve tried to buy a Fannie Mae property within the first 15 days of it hitting the open market. See, this Firstlook program was concocted during some Democrat luncheon, where wealthy bureaucrats munched on Wagyu tenderloin and set about curing what ails the housing market. In that meeting, it was apparently decided that what ailed the housing market was the existence of investors, and of evil rich people who wanted to buy vacation homes. The cure for this was to create a more “fair” market place, by forcing such non-primary home buyers to wait 15 days before they can purchase listed Fannie Mae inventory.

Fannie Mae is no longer in the proper business of liquidating an asset as quickly as possible, they are instead in the business of picking winners and losers, in siding with one demographic over another. They are no longer in the game of maximizing taxpayer return, they are in the game of waiting on the right buyer to buy taxpayer owned inventory. Time is money, unless you’re Fannie Mae, then that’s just a silly saying that matters little. When you combine accelerated REO pricing with bumbling Federal programs like Firstlook, it appears as though the new goal is to string out this housing recovery for as long as possible.

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