Fannie Mae Foreclosures
Like the Department of Veterans Affairs (VA) and the US Department of Housing and Urban Development (HUD), the private loan company Fannie Mae (http://www.fanniemae.com) has helped millions of American families to purchase their own home. The company also sells on large numbers of properties every year as a result of foreclosures due to non-payment of home loans.
Like the VA and HUD schemes, the Fannie Mae home loan program works by lowering the threshold requirements for home loans. With backing from Fannie Mae, prospective home-buyers are able to make significantly reduced down-payments and discounted monthly repayments on home loans from selected banks and mortgage institutions.
What happens behind the scenes is that Fannie Mae borrows money at low interest rates from foreign lenders with support from the Federal government. It then lends the money on to US borrowers at a higher rate. The profit from the difference in interest rates allows Fannie Mae to cut the cost of loans and accept lower down-payments. A similar service is provided by the company Freddie Mac (http://www.freddiemac.com).
As with all home loans, if borrowers default on loan repayments, the company is entitled to start formal foreclosure proceedings. If nothing is done to stop the foreclosure, ownership of the property passes to Fannie Mae and it can then be sold on as Real-Estate Owned (REO) property to cover the company's losses.
Prices for Fannie Mae foreclosures tend to be slightly higher than at public auctions or pre-foreclosure sales and slightly lower than the prevailing market rate. Depending on their individual financial circumstances, new buyers may be eligible for Fannie Mae-backed loans. You can find a state by state search engine for Fannie Mae-owned properties on the Fannie Mae website.
As is usually the case with foreclosures, Fannie Mae would prefer to avoid the cost and inconvenience of foreclosure and keep borrowers as profitable customers. The company works in partnership with lenders on various loss mitigation schemes that enable homeowners who default on repayments to keep their homes.
A similar service is offered by private housing counseling agencies, but borrowers with Fannie Mae have the reassurance of working with people who have a vested interest in making the original loan work out. If the financial problems are temporary, it may be possible to retain ownership of the property through a repayment plan, forbearance or loan modification.