FHFA Will Allow Some Foreclosed Owners to Repurchase Homes at Market Value

In what could be a controversial move the FederalrnHousing Finance Agency (FHFA) has directed the government sponsored enterprisesrn(GSEs) to allow foreclosed homeowners to repurchase their former homes at fairrnmarket value.  Prior to Tuesday’srndirective foreclosed homeowners were required to pay Freddie Mac or Fannie Mae thernentire amount that had been owed on their mortgage prior to foreclosure.  This requirement applied as well to any thirdrnparty who sought the buy the home for the benefit of the previous borrower/owner.rn This requirement had meant that the GSEsrnhad to treat such prospective purchasers differently than others who wished tornpurchase the property and were allowed to do so at the fair market price asrndetermined by the GSEs.</p

“This is a targeted, but important policy change that should help reducernproperty vacancies and stabilize home values and neighborhoods,” said FHFArnDirector Melvin L. Watt.  “It expands the number of potential buyers ofrnREO properties and is consistent with the Enterprises’ practice of requiringrnfair-market value for those properties.”</p

The policy change does not alter the existing rule that a borrower who hasrngone through a foreclosure on a GSE owned or guaranteed loan must wait arnminimum of three years after the foreclosure to regain eligibility for anotherrnGSE related loan.  The REO propertyrnpurchased for the benefit of the prior owner must also still be intended to bernoccupied by that owner as a primary residence. rn</p

The policy change is limited to Fannie Mae and Freddie Mac REO inventory ofrnsingle-family homes as of November 25, 2014.  FHFA estimated that the tworncompanies have approximately 121,000 properties in their combined REOrninventory.  Certain property exclusions may apply and will be handled byrnthe GSEs on a case-by-case basis.

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