Similar to Fannie Mae foreclosures, these are properties guaranteed by Freddie Mac (Federal Home Loan Mortgage Corporation), a government-sponsored enterprise that purchases loans as mortgage-backed securities.
Freddie Mac is a part of the government which assists citizens and mortgage lenders by providing support in the housing industry. This is done by purchasing loans directly from lenders so that those banks and mortgage companies are able to then recoup their funds to make additional loans to new borrowers.
The government entity helps people achieve the dream of home ownership by making sure that the mortgage market has plenty of money to loan. In fact, one out of every four home loans originated in the United States comes as a result of Freddie Mac loan procedures.
Simply put, Freddie Mac owned properties are those which are owned by the Federal Home Loan Mortgage Corporation (FMLMC). When a homeowner becomes delinquent in their monthly mortgage payments, they are at risk of foreclosure. This causes Freddie Mac to repossess the home as they are the loan servicer of the property.
Remember that lenders (and the government) do not wish to own homes. That is not the business they are in. Their desire is to get rid of these liabilities as quickly as possible, which is why the deals can be so fantastic on Freddie Mac foreclosures. They will sell properties as soon as possible just to reduce liability, recover their losses and avoid paying continuous maintenance costs associated with vacant properties.
Freddie Mac foreclosures do not sit on the market for long because they are typically very good deals. Sometimes, you can get homes for 50% or less of their fair market value. However, you have to understand the process and terminology when it comes to purchasing Freddie Mac homes for sale.
The first place to look when you are wondering how to go about buying Freddie Mac foreclosures is HomeSteps. This is a Freddie Mac program. In short, this is a part of the Freddie Mac organization, and it offers desirable and affordable homes to buyers. There are also discounts and incentives offered for owner-occupant buyers. This is not to be confused with Fannie Mae which has a similar program called HomePath.
Owner occupant buyers are given the first rights to look at HomeSteps properties. This happens within the first 15 days that the home is listed on the market. These home listings are later opened up to investors if an owner occupant does not buy them. As Freddie Mac REO homes make a great investment, the government realizes that investors deserve an opportunity to purchase one too.
In order to purchase a HomeSteps property during those first 15 days, the buyer doesn't have to be a first-time home buyer. They simply have to be an owner occupant.
HomeSteps has a special SmartBuy home purchase program which gives buyers went to 3 1/2% of their closing costs, up to a 30% savings on new appliances and a limited two-year home buyer's warranty. Obviously, this is a great set of perks for owner-occupied homebuyers.
A unique part of Freddie Mac properties for sale is that they are taken care of in a specific way. The first thing that Freddie Mac does is secure the home and remove any trash from the inside or outside. They also get the inside and outside clean, and make sure that the property's lawn is maintained on a weekly basis. They do this because the believe in making sure that the surrounding community is protected from having to live with an eyesore. Their regional area managers also conduct random inspections of their properties to make sure that things are being cared for properly.
For property investors, Freddie Mac repos also provide great investing opportunity. For one thing, you will find online and live auctions through major auction houses such as Hudson and Marshall as well as RealtyBid.com. Investors must register in advance if they would like to participate in an auction. The live auctions happen all across the country.
Another unique way that investors can benefit from Freddie Mac real estate is by participating in bulk sales. This is when HomeSteps sells off six or more properties to the same person at the same time. This package can be a combination of single-family homes, townhomes, 2 to 4 family units and condominiums.
Investors can specifically request six or more properties that they have already identified. On the other hand, they can give certain criteria that they're looking for, and the bulk sales team will send them a list of foreclosed properties that match their buying criteria. As with anything, there is a preapproval process that an investor must go through in order to participate in a bulk sale. They will have to fill out a questionnaire, provide tax information, provide a letter of interest, provide a letter of intent and assign a bulk sale contract. Then, they will undergo an internal review and approval process. Not every applicant is approved, however this doesn't prevent an investor from purchasing homes on an individual basis if they are not approved for the bulk sale.
The Home Affordable Foreclosure Alternatives program, commonly known as HAFA, was instituted in 2009 to assist homeowners who were unable to keep their homes under the existing Home Affordable Modification Program. HAFA gives incentives for people who are participating in a normal or Freddie Mac short sale or deed in lieu of foreclosure. The program complements the HAMP process by giving borrowers an alternative even if they are not able to keep their home.
One part of this program allows borrowers to get preapproved for a short sale before they even list the property. It also requires that the borrower is completely released from any liability related to foreclosure on the property. In other words, the lender cannot pursue a deficiency judgment against the borrower later. There are also some financial incentives including a $3000 amount for relocation assistance for the borrower and $1500 for servicers to cover their processing and administrative costs. In addition, the program gives investors up to $2000 when they allow a total of up to $6000 and short sale proceeds to be given to subordinate lien holders.
There is no standard guideline. Sometimes Freddie Mac is fairly quick to accept your offer, within a week or two. Other times it may take longer. Consult with your real estate agent for more specific guidance.
You can begin by going through a registered HUD broker and submitting an offer. You and Freddie Mac will negotiate the terms of the contract, supported by any required documentation, and you will gain possession upon successful completion of the final written contract.
Theoretically, most major banks are able to refinance Freddie Mac loans. However, whether or not your bank is participating depends on the bank itself.
Freddie Mac does not provide home loans (mortgages) to individual homebuyers or investors. Instead, Freddie Mac is in the business of buying loans issued by private lenders, such as banks, so that the bank can then issue more loans – thus creating a liquid mortgage market. As a result, Freddie Mac owns the mortgage for roughly $261 billion worth of homes in America, as of 2010. Freddie Mac purchases a wide variety of loans from lenders, ranging from traditional 30-year fixed mortgages to ARMs and other types of conventional loans. So, while Freddie Mac does technically own the mortgage on many homes, it does not directly lend funds to homeowners looking for financing and does not originate home loans.
Theoretically, you can offer as low an offer as you want on a Freddie Mac-owned foreclosure. Practically, though, you should price your offer based on the condition of the property, the surrounding market, the time the property has been on the market, and what you suspect other bidders might offer. Consultation with real estate brokers is highly helpful because they can provide insight into the surrounding area and the local market, which plays a role in whether or not your bid for a Freddie Mac owned foreclosure is accepted. Purchasing in cash also gives you more room to submit a higher offer. Conventional wisdom states that, depending on the above factors, an initial offer of 10-20% below asking price is acceptable, with room to negotiate further. If the listing agent is asking for highest and best, though, a low-ball offer probably will not work.