FHFA Allows REO Properties to be Purchased at Market Value

The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac (Government Sponsored Enterprises or GSEs) to allow qualified buyers to purchase Fannie Mae and Freddie Mac REO properties at current market value.  Previously, homeowners who went through foreclosure and wanted to buy their homes back had to pay the entire amount owed on the mortgage.  The change also allows a third party to purchase the property on behalf of the previous owner.

The change will permit the two companies to sell existing REO properties to any qualified purchaser at the property's fair-market value, as determined by GSEs. Under existing GSE rules, former borrowers must wait a minimum of three years after a foreclosure to be eligible to receive a loan purchased or guaranteed by Fannie Mae or Freddie Mac.  The purchase of an REO property for the benefit of the previous owner must also still be intended for use by that owner as their principal place of residence.

Prior to the change, GSEs required homeowners who have been through foreclosure and want to buy their home back to pay the entire amount owed on the mortgage.  This requirement similarly applied to anyone buying the home for the benefit of the previous homeowner.  Under the new policy change for existing REO properties, former homeowners who are able to repurchase their home – or a third-party able to purchase on their behalf – may do so under the fair-market value policy that already applies to other purchasers of REO properties.

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