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Fannie Mae Lip Service and Its Bad Press
We used to call them hypocrites but now we call them corporations or politicians because those are more polite words. Those words don’t necessarily expose the underbelly. For example, you know what lip service means, right? It means the lips are moving but the words that are coming out of those lips are meaningless. Some real estate agents would say that Fannie Mae is pretty good at giving lip service. But when it comes to being an advocate for home buyers, there is little actual support or action to back up some of Fannie Mae’s statements.
My mother used to say: forget what people say and look at what they do.
Fannie Mae has been under attack by all sides lately. Much of the criticism has had to do with the fact that in many situations Fannie Mae will over-estimate the value of a home, in particular, short sale homes. The theory is Fannie Mae over-estimates the value so it doesn’t have to deny the short sale, which might be its actual goal. If the value is too high to receive an offer or even appraise, then Fannie Mae can be assured that the short sale won’t happen and the home will go to foreclosure. When the home goes to foreclosure, it pops into Fannie Mae’s REO inventory, and Fannie Mae now has the opportunity to provide its own over-market financing, which can result in shoving more unsuspecting homeowners underwater the day the escrow closes. Don’t you love lip service?
Whenever I spot a home for sale in Sacramento that is offered with HomePath financing, the sales price is almost always 10% to 20% above market value. The beauty of HomePath financing is there is no appraisal to dispute the value. Home buyers can get suckered because they don’t know the value.
Well, now Fannie Mae has implemented a new procedure for short sales, most likely in response to the uproar from agents across the country. This new procedure now involves obtaining 2 appraisals on the short sale home. Fannie Mae hires its own Fannie Mae appraiser, the guy with the rose-colored glasses, and an independent real estate agent to do a BPO. Except the independent agent who does the BPO probably isn’t paid enough to do all of that work and completes the BPO in hopes that Fannie Mae will someday hire that agent as its own REO agent. Everybody has an agenda.
This way, regardless of what happens to the sales price, Fannie Mae can say it was proactive. It’s better than a poke in the eye with a stick, but it still seems like it might be lip service to me.
Sacramento Short Sale Approval Delays Can Raise the Sales Price
I wrote on Sunday about how I listed this Sacramento short sale from a remote corner in the world, using a spotty internet connection at Rangiroa Atoll during Christmas vacation. I also mentioned the fact that if a short sale takes too long to negotiate or a Sacramento short sale agent has to start over because a buyer walked, the price of that short sale can go up. In this particular short sale, the seller had received a short sale approval but some mismanagement or confusion caused, he said, by his previous agent, resulted in a cancellation. Hence, he hired me.
Of course, I could daydream that all sellers should just list with me in the first place and avoid those types of hassles, but the truth is I could not handle the volume of every single short sale in Sacramento, nor would I want to. And there are other good short sale agents in Sacramento, some of which work at my company and to whom I occasionally refer business.
We went on the market at the price the banks had previously approved for the seller. Part of the problem was one of the banks sold the servicing of the loan since then. This is a phenomena I am seeing more of — banks dumping underwater loans and / or servicing to the market that was created to purchase worthless debt, some of which the banks own. The bank ordered a new BPO, even though the previous BPO had not expired.
Whoa. Prices were bouncing upwards. Now the bank wanted 20% more than it wanted a month ago. It’s a seller’s market in Sacramento. I presented that counter offer to the buyer, and the buyer immediately canceled. I don’t know what that buyer thought he could buy now that he was no longer in contract. Not my problem, though.
Found a new buyer and put that buyer into contract at the higher sales price (which by now, I should point out, is much higher still but the buyer has the price locked). We thought everything was going smoothly until the new second lender decided it wanted a lot more money than what the first lender was willing to allocate. The investor was Fannie Mae, so unless that bank has never dealt with Fannie Mae before, the bank should know that Fannie Mae has its maximum, and that’s the maximum. Fannie Mae does not allow anybody else in a short sale to pay the second lender, either.
That was little battle with the second lender, to get the bank to understand a) the first loan was really owned by Fannie Mae and b) the max is the max per Fannie Mae. After what seems like another couple of months, the second finally agreed and issued its approval letter.
Right before the lender’s property preservation company called and was about to shut off the water and change out the locks. But fortunately, that did not happen, and we were able to move forward to close. If you’d like more information about a short sale in the Sacramento region, please call Elizabeth Weintraub at 916.233.6759.
Fannie Mae and Other Things That Don’t Work Right
It seems like I have to fix a lot of things that don’t work right. It’s not necessarily that they are broken as much as it is they simply don’t work correctly. Stuff goes haywire. In fact, I am so used to things that don’t work right that I have become somewhat complacent. I don’t get upset over it. I just fix it.
Almost nary a day goes by when I don’t run into some short sale negotiator telling me the bank won’t authorize seller credits on the HUD. Since when did a bank negotiator become a HUD expert anyway? I realize they don’t know how to read a HUD. If they had to prepare a HUD from scratch, they’d be up a creek without a paddle. Yet, here they are telling me to remove fees that are not credits under the assumption they are correct. They’re not correct. This problem has become so commonplace that I keep a stock answer prepared and ready to email. They don’t work right.
Last Friday my company email went on the blink. Stopped downloading to my computer. None of my settings changed. My email client stopped receiving. The company’s exchange server was not updated or altered. The IT department signed on to my computer to check but they couldn’t find anything wrong, either. We ended up doing a redirect. Because it doesn’t work right.
Yesterday we had to call out an electrician to remove a bulb from a kitchen pendant. We’ve had the pendants fixed twice. Third time they stopped working, we bought new pendants. None of this Lumen’s back-basement discount crap. We ordered blown-glass Oggetti. Then, the darned burned-out bulb got stuck in the socket and a wire connection busted. That’s why it doesn’t work right.
In many Sacramento short sales, I routinely encounter the dreaded Fannie Mae problem with second loans. Now, I heard a guy at DTS admit the other day that they kick out Bank of America Cooperative short sales when the investor is Fannie Mae. He said DTS has had too many problems with Fannie Mae. Because Fannie Mae is a government-sponsored entity, it doesn’t work right.
Fannie Mae has guidelines that are often somewhat restrictive. Like telling borrowers to stop making mortgage payments. Yeah, that’s your government telling you to go into foreclosure. Or, choosing foreclosure over a short sale by refusing to postpone a trustee’s sale. Another involves the payment it will approve to a second lender. Second lenders want to negotiate and try to get more, but Fannie Mae won’t allow it.
Most second short sale lenders realize the problem with Fannie Mae. They tend to get on board. Especially since Fannie Mae rarely makes exceptions. I even had the gatekeeper at Green Tree back down on a second demand a few months ago when I explained that since Fannie Mae was the investor he needed to accept 6% of his unpaid balance. He said: Why didn’t you say so? As though telling him my name was Dorothy would get me into the Emerald City. The system for some second lenders, though, is broken. They don’t work right.
And you can’t fix Fannie Mae.
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