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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.
A Sneaky Way for Fannie Mae to Reject Short Sales
Fannie Mae and Bank of America can be a difficult combination in a Sacramento short sale. Not insurmountable by any stretch but still difficult. Part of this stems from the guidelines overhaul last fall, I suspect, in addition to the fact that Fannie Mae has been releasing Bank of America from servicing. But much of the struggles short sale agents face with Fannie Mae short sales probably have a lot to do with the fact that Fannie Mae, under the direction of the FHFA, has been moving away from short sales all together. There is a lot of speculation in the short sale community as to why.
It’s kind of a joke that Fannie Mae has set up a place where short sale agents can escalate or contest a price valuation. It’s just a website and a process to make an agent feel like Fannie Mae is doing something positive when it’s not. Just a way to shut up an agent. It’s sort of a smoke screen, I imagine. Because I knew a value was wrong, and I asked Fannie Mae to review it. Not only did the BPO agent call me upon completion of the BPO, but she told me the value. Fannie Mae again insisted on a much higher value — even with the evidence of the true value put before its very eyes. The BPO means nothing. The review process is worthless.
It doesn’t matter what the value is to Fannie Mae, if it doesn’t want to do the short sale it will set a value too high. And the value will stay there until the moon turns blue or the market finally turns around. That’s Fannie Mae and our government for ya.
I’ve got another short sale in which Fannie Mae is insisting we produce corporate documents for a buyer who is not a corporation. It doesn’t seem to matter how many times we ask them to read our lips, the buyer is not a corporation, the buyer is a general partnership, Fannie Mae has continued to demand corporate documents such as Articles of Incorporation. When we finally passed that hurdle, the representative from REDC asked for POF in the partnership name. It seemed fastest for the buyer to deposit all of the funds, including the balance of the sales price and all of the closing costs, into escrow.
The buyer deposited all funds into escrow and we presented Fannie Mae with the receipt. Not good enough, says REDC. The buyer must now remove all of the money from escrow, put it back into the bank and produce a bank statement. I’m not kidding. I wish I could make up this crazy crap — but then I wouldn’t be a Sacramento short sale agent, I’d be some insane person in a mental hospital.
Will both of these Fannie Mae short sales close? Yes, most likely. And that’s why I’m a successful Sacramento short sale agent. I hang in there for the long haul and don’t give up.
What’s Wrong With the California Homeowner Bill of Rights
How will the California Homeowner Bill of Rights affect short sale sellers in Sacramento? Despite all of the hoopla over it, not much. Probably the most important aspect of the Bill of Rights as it relates to short sales is the stopping of dual tracking — but that only goes into place after short sale approval, not prior to short sale approval, which is when a homeowner needs it.
Dual tracking happens when a foreclosure has been initiated. This means a Notice of Default has been filed in the public records despite a homeowner’s good faith effort to find a solution. Here’s the way it works before and after the California Homeowner Bill of Rights:
- Homeowner falls behind and stops making mortgage payments.
- Homeowner pursues a short sale.
- Lender files for foreclosure.
- Trustee’s Auction date is set.
- Despite a pending offer for a short sale, home can go to foreclosure.
I can only begin to imagine the trepidation felt by homeowners facing an impending trustee’s auction. The problem is most banks will refuse to review a request to postpone a trustee’s auction until the auction date is 3 to 7 days away. It’s not as simple as asking the bank to permanently stop foreclosure action. Certainly not a month or more in advance. Nope, the banks make homeowners chew on their fingernails wondering if the homeowners will be tossed into the street almost all the way to the 11th hour. It’s as though they get some kind of perverse pleasure out of this type of torture. Why can’t a bank postpone a trustee’s auction when it’s 30 or 60 days away? Why make homeowners wait?
One of the services I provide as a Sacramento short sale agent is requesting the postponement of a trustee’s auction. This service, far as I am concerned, falls outside of the scope of selling real estate and dangles dangerously into the realm of practicing law. Sometimes I can’t sleep at night, worrying if a sale will get postponed. A bank is not required to postpone an auction. In fact, if the investor for that loan is Fannie Mae, you can bet your bottom dollar the auction won’t get postponed. That’s why some short sale agents refuse to work on Fannie Mae short sales.
If the California legislature really wanted to pass a Homeowner Bill of Rights, they’d stop dual tracking after a short sale is initiated and verified. Not after short sale approval. Because after the short sale is approved, there is little reason for the bank to initiate a Notice of Default.
