Fannie Mae Short Sales | Price Fixing Scandal?

83 Flares 83 Flares ×

If you’ve been following the Internet lately, there are lots of conversations going on about changes at Fannie Mae. Many short sale agents have noted that the prices of Fannie Mae short sales and REOs seem to be slightly higher than market value. In fact, even savvy short sale negotiators sometimes have problems with valuation disputes on Fannie Mae short sales.

According to the Internet buzz, Fannie Mae would prefer foreclosure over short sale. That’s because they can put the properties back on the market as an REO, and seek a buyer that will use HomePath financing. With HomePath financing, there is no appraisal. So, Fannie Mae can charge a premium for their REO properties. If you are still with me, then you realize that these new homebuyers are underwater on their new mortgage on the date of the closing.

In addition to alleged price fixing, here are some other fun facts about Fannie Mae. Fannie Mae now has some flipping rules. A buyer cannot flip the property for 30 days after closing, and the property cannot be flipped for more than 120% of the sales price. Clearly, this rule is not going to attract many investor buyers to Fannie Mae REOs.

There was significant chatter in November when Fannie Mae and Freddie Mac stated that they would have streamlined short sale guidelines. According to Fannie Mae, these guidelines would make the processing of GSE short sales more quick and efficient.

Of course, if you are going to quickly decline a short sale because you believe that you are better off foreclosing, that is your right. It’s a free country. But, spinning the news as if you are going to make things easier for distressed borrowers and their agents when you are really just planning to foreclose may not be the best way to go. Not everyone was born under a turnip truck.

What say you? Please feel free to share your thoughts down below!


(photo credit)





  1. A week ago I tweeted “Fannie,Freddie = uncooperative,overpriced short sales: this grand gesture is a waste of time if they continue that M.O. At that time I was unaware that with Home Path there is no appraisal: this is a recipe for fraud upon fraud.

  2. It is sickening that in one moment FNMA can tout “streamlined” and their next move is to force foreclosure. I have a 2nd level at Fannie Mae doing manual reviews for every legit value dispute I have. I even kicked up so oldies. Fannie is adding up to 25% to the true value, forcing foreclosure sales. To add salt to the wound, Fannie Mae is giving agents an incentive- let’s call in HUSH MONEY- for selling the HomePath listing. In other words, don’t tell your buyer they are over-paying and we will give you $1000 in addition to the 3% commission. Since this is a Government Sponsored Entity, we should have some “interference” from our government on Fannie’s practices. But profits before people is the mentality. 2nd level review at Fannie even stated this to me, it’s a “business decision.” Federal Housing Finance Agency simply forwards the request to review to Fannie Mae but doesn’t “act” on anything.

  3. Thanks for keeping us updated on this new ‘plot’ from FNMA. I have actually noticed in my area that REO’s are clearly being overpriced in the last 60 days. Buyers are not falling for their latest strategy – they are sitting on the market in their overpriced state.

    • Melissa Zavala

      Hi Lyn:I think that in certain areas buyers are so anxious to get something fast that they are actually willing to pay above market value. Glad to hear that it is not happening in your area.

  4. This explains so much…why 2 out 3 of my Fannie May short sales with BOA have been stalled and the only reason one of them closed is because the homeowner was calling the servicer as much as I was. Trying to dispute a valuation is impossible under BOA/FHA guidelines especially when they were using paperwork from Countrywide…amazing what you can find with the proper software creater of a document and the date when it is created stays with the document unless you know what to do…so glad that I worked for a techy firm that taught me a lot.

    Profits, and more profits while they deny people loan modifications then force them to do a short sale then deny the short sale only to foreclose and sell it to a buyer that will overpay because they think they are getting a “deal”.

  5. I had the same thing happen. Presented cash offer and it was turned down and servicer stated that FNMA wanted about 20% more. They also stated they don’t know why but that FNMA is requesting more than appraised value on 50% of their short sales lately. So I presented an appraisal showing that the offer was 2% more than appraised value. The service still turned it down saying they want more and acknowledged that even their own appraisal was close to the offer we presented. We escalated to 2nd level review at FNMA and still waiting for a call back. First level told us it is up to the servicer to postpone the sale and servicer tells us the investor (FNMA) wants a higher offer. We have closed 87 short sales in last 24 months in CA. No one is going to pay 20% more than market value for a property. Intentionally foreclosing on a homeowner after borrower, buyer, seller and agents have worked on the foreclosure alternative for a year and have a full appraised value offer in escrow is a disservice to the public and U. S. economy. Shame on you FNMA.

  6. On a side note, the other govt. lending institution, Freddie Mac is currently listing their foreclosures at market value but forcing home buyers into Freddie Mac loans. I was told at a training seminar that if a borrower is getting VA financing they should not even waste their time bidding on a Freddie Mac foreclosure right now. It is all about the net to Freddie Mac and it just does not make financial sense for Freddie Mac to risk selling to VA because of the strict VA appraisals in regards to condition of the property (and valuation). Once a buyer’s bid is accepted on a Freddie Mac home all the terms of the bid have to be met. If the home does not appraise or there are repairs required for the deal to close Freddie Mac will not budge and the initial deposit will be taken from the buyer and escrow cancelled. The distaste for VA is primarily from the fact that VA appraisers will sometimes have req. repairs and Freddie Mac WILL NOT pay for any repairs that were not agreed to prior to the bid being made. A government institution that does not like to sell their homes to our veterans who risk their lives for our Country. Kind of Ironic.

    • Melissa Zavala

      Cherise, As we get further and further through this recession and out the other end, I think we see more and more ironies. The one you mention is tragic.

  7. Travis Waller

    Funny this article comes out now. Just had a loan HAFA approved in December for a contract in amount of $176,000. Then out of left field, inthe first week of January, the file was transferred over to FHA short sale and now they wanted $203,000. Unbelievable.

  8. I wonder what percentage of Fannie Mae REO homes end up with a buyer using their HomePath buyer loan? Do Fannie Mae asset managers review offers on these REO homes and throw the FHA/VA/Conventional buyers away and ask for their final and best offer or ‘strongly’ suggest an offer over the fair market value?

    Anyone ever heard of a Fannie Mae REO counter an FHA buyer and ask them to use HomePath?

  9. I agree that Fannie has the right to hold out for a higher price and to foreclose. The part I don’t like is spending 2 weeks uploading offer documents in equator only to instantly receive a high counter as soon as the docs are completed. Why not give us this counter as soon as we upload the offer and HUD? Wasting time uploading documents is foolishness.

    Or better yet give us a price before we place the property on the market then have set price reductions.

  10. Nancy Dinucci

    This question is for Steve Spiro: Just wondering who your high level intervention is at FNMA. Is it a level 2 person?

    We have 3 houses currently in valuation dipsutes with FNMA.
    One is now with a level 2 person at FNMA. Just wondering if we are dealing with the highest level of intervention, because we need it! Thanks.

  11. See below an article from Mortgage Servicing News that came out this week in regards to Fannie Mae Short Sales:

    Fannie said it has expanded its HomePath for Short Sales tool in an effort to resolve short sale challenges “once a case is escalated.” It also creates a short cut for real estate agents.

    According to Jay Ryan, Fannie’s vice president, it also creates a short cut for real estate agents, “By giving agents a straightforward, transparent way to escalate short sale issues to Fannie” it is expected to help close more sales, prevent foreclosures and stabilize neighborhoods.

    The new tool follows up on other taken steps to reduce short sale timelines, Fannie said, including expanding eligibility for short sales and prohibiting servicers from reducing an agent’s commission.

    Fannie said it “will directly engage” with real estate agents or servicer to address new short sale escalation process challenges, such as “valuation disputes, delays by servicers or uncooperative subordinate lien holders.”

    Fannie said it is open to assist any real estate professional working on a new short sale escalation process related to a Fannie owned loan. Realtors can use the HomePath to receive a recommended list price from Fannie prior to listing the property for sale.

    The HomePath for Short Sales escalation tool has been received well by real estate professionals across the country who have already started use it to resolve challenging short sale issues, Fannie said.

    Maryann Little, vice president for short sale mitigation with AA Premier Properties LLC and Short Sale Mitigation LLC in Stoneham, Mass., who recently used HomePath for Short Sales to communicate with Fannie representatives, said the tool escalated the resolve of a property valuation dispute in less than 24 hours. “I appreciated that I could send comps directly to Fannie Mae and let them know what we were seeing on our side of the short sale.”

    According to Kelby Teer, a real estate professional with HomeSmart in Phoenix, the new tool can expedite a short sale process in cases when servicers are not responsive to Realtors. It helps escalate the case to Fannie and to get a very quick short sale approval.

  12. Greg Bloss

    Aloha, I was just told by Greentree that I had to go to the Homepath webpage and submit a value dispute,I have looked all over for a way to do that, any help on this is greatly appreciated.

  13. Now they’ve got a new announcement: They’ve changed the name of deed-in-lieu to “mortgage release,” and beginning in March will allow those who are current on payments to simply walk away.

    But… if you keep reading, the loopholes/qualifications are many and the costs high. If the borrower has financial assets, they’ll be expected to pay.

    California homeowners get a far better deal with a short sale!

    • Melissa Zavala

      Marte: Thanks for chiming in. I’ve got the “new announcement” on my to-do list. To quote Roseanne Rosannadana, “It’s always something. If it ain’t one thing, it’s another.”

  14. Hi Melissa,

    As usual, great blog and topic!

    Fannie Mae overpricing properties has been going on for years. In fact, my mental note is that usually on day one those REO properties are at least $30,000 overpriced. I had a hilarious reinforcement of that gut feeling recently. I short sold a little condo for $103,000 in November. At the time I had a cash buyer walk out when he couldn’t get it for under $100,000. Beginning of January, Fannie lists the same type unit in the same development. Guess the asking price? $132,900. It’s like science! But guess what? With limited inventory, it sold in 9 days. I also just closed a Fannie REO for a buyer and it did not appraise to the tune of $23,000. From what I understand, as a matter of policy Fannie does not want to be accused of killing neighborhood real estate values with low foreclosure prices.

    I have no idea why they have turned this philosophy on to their short sales — but they obviously have. However, Homepath Financing is not available on Fannie short sales (yet?), and most of the time I’ve represented buyers on Fannie REOs I either spend a long time negotiating them down $30,000 (if the market permits), or they get batted down on appraisal. I’m told they prefer Homepath offers, and I understand why.

    I am sympathetic with short sale agents about short sales getting tanked, but this has apparently been Fannie’s practice and philosphy for YEARS when it came to REO and I never heard any agent complaints or outcry. Glad to hear this practice has come to light and is being questioned and discussed. I’m sure if I owned property in a neighborhood with a Fannie REO I would like the practice, but you are right, unless the appraiser saves them (using Fannie guidelines — LOL) the buyers are paying top dollar for an as is foreclosure, now get them to wait 4-6 weeks for approval on top of that and you can see the dilemma of holding this together in a short sale scenario.

    • Melissa Zavala

      Hi Tni. Thanks so much for stopping by. The more I research and read about the topic, the more I wonder if it is such a bad thing. Yes, bad for short sale sellers and short sale buyers. But, if the US Government holds the largest stake in Fannie Mae, is it such a bad thing to try and preserve the investment? Of course, the irony is that the folks getting the shaft also share in that large stake (not to be confused with sharing a large steak 😉

  15. A steak sounds good right about now!

    I’m curious, have you heard of any agents coming back to Fannie with a buyer appraisal (crafted with lovely Fannie guidelines) and successfully using that to modify an inflated Fannie short sale counter offer? When I’m in that type of situation with a Fannie REO — they usually agree to sell for appraised value — although sometimes they complain a lot. I can’t see why they wouldn’t agree in the short sale context — Fannie does seem to understand that appraised value is appraised value.

    And of course FHA/VA appraisals are binding on the property for quite some time. No way around that one if they indeed do want to sell it. It seems Fannie’s goals/philosophy are in conflict here. Keep values high vs. make foreclosure avoidable. Looks like they need to have a big meeting and get their collective head straightened out. Maybe order some steak for the meeting and let the HomePath division pick up the tab.

    • Melissa Zavala

      Not sure whether this answers your question, but we have done a fair amount of valuation disputes directly with Fannie Mae–most of which include appraisals. Generally, we’ve had fairly good success in that area!

      • Art Hughes

        When you say appraisals do you mean separate independent ones or the buyer’s loan appraisal? My buyer’s submitted full price offer of 269k and Seterus responded with 315k. Listing agent escalated to fnma with a 285k appraisal(not buyer’s), comps, repair estimates etc. and the fnma SS Escalation Desk came with 313k. Are they waiting to see the new lender appraisal and if so is this when you’ve had fairly good success?

        • Melissa Zavala

          Hi Art, This article is really talking about REOs–how FNMA prefers to have the properties as REO where they buyer can get a HomePath loan (with no appraisal). But, this is what may be accounting for the troubles you describe.

  16. It does and that sounds about right.

    Sounds like on my next Fannie deal I am going to make sure that the buyer is willing to order the appraisal right away.

    You are definitely a great short sale resource Melissa!

  17. Michele

    Looking for some words of encouragement regarding Fannie Mae lowering purchase price on a home to meet appraised value to enable VA funding…my boyfriend and I are attempting to purchase a Fannie Mae Homepath property (St. Cloud, FL) using VA funding. House was listed for $265,000, we offered $255,00 – they countered at $265,000 with seller to pay $7,000 toward closing. We accepted their counter, signed paperwork, and were given a closing date. Had appraisal and inspection completed per VA requirement…appraisal came in at $225,000…$40,000 below asking price. Our Realtor notified seller’s agent and bank of appraisal, and has asked that price be renegotiated to reflect appraised value. We’ve been waiting 3 weeks, have heard nothing, and I’m heartbroken. Can anyone offer any experience they’ve had in regards to how likely it is Fannie Mae will lower price to reflect appraised value? They were aware that we were going VA when they accepted our offer.

  18. Cheryl

    Yes, this just happened to us. Seller had home on the market as a short sale for 377,000 we put a contract on it. Seller had 2nd lien holder(Chase) that totally locked up the deal. After foreclosure Fannie Mae put the home on the market for 434,900! We bid on it and won for 417,000. Well VA appraiser said house is not appraising out for that. Fannie Mae is suggesting we use a home path loan which does not require an appraisal! I want to see the appraisal or comps Fannie Mae used to price it. No word on whether they are going to sell it for what VA appraised it for or want us to pay difference( which is not going to happen). Seems a little fraudulent…

  19. Cheryl

    Michele, this just happened to us. Seller had home on the market as a short sale for 377,000 we put a contract on it. Seller had 2nd lien holder(Chase) that totally locked up the deal. After foreclosure Fannie Mae put the home on the market for 434,900! We bid on it and won for 417,000. Well VA appraiser said house is not appraising out for that. Fannie Mae is suggesting we use a home path loan which does not require an appraisal! I want to see the appraisal or comps Fannie Mae used to price it. No word on whether they are going to sell it for what VA appraised it for or want us to pay difference( which is not going to happen). Seems a little fraudulent…

  20. Marian Anslow

    How dare Fannie Mae wast many hundreds of our US$ Travelling on a 600 mile round trip. And many $ on house, water and sewerage inspections and waiting 7 months of an anguished time, and then they pushed the price up so much from the original Contract. these people should be crucified we do not have a house even now where we wanted to be, This just has to be FRUIDE We should be compensated.

  21. Aundrea Caputo

    I’m a little confused as to what just happened to me as a buyer. I put an offer of $300,500.00 on a short sale that needs a lot of work (new carpet, countertops, etc.). The listing price was $325,000.00. The owner has to mortgages and owes around $300,000.00. The second mortgage accepted my offer. The first mortgage had the property appraised and then the information was sent to Fannie May. Fannie May has countered back at $392,000.00. Is that legal? I’m so discouraged after waiting so long already and such an outrageous counter. I thought in a short sale the bank can’t ask for more than what the owner owes?

    • Melissa Zavala

      If the property is actually worth 392k, then it would not be a short sale. You are right. The bank cannot ask for more than the amount owe. Don’t forget that this amount may also include late fees, legal fees, and a whole bunch of other things. But, it seems unlikely that those other things would total “392k”. Also, did you mean that the first lien has a balance of 300k or the first and second combined? If there are two liens and the amount owed to the first is 300k and the second is owed something more, then the first would be aid in full and it would be a short sale to the second lien holder only. Hope that helps.

  22. B I double L

    My wife and I are attempting to buy a Fannie Mae REO home that is in move in condition. We are financing through the VA and are under contract for 239,900. Well, the appraisal just came back low (full report has not been delivered yet, so I don’t know how low). Since the home has been on the market for over a year as REO, do you believe that Fannie Mae would be motivated to lower the price to the appraisal price in order to see the deal through?

  23. Dominic Foscato

    Need some help here. My wife and I put an offer on a Homepath home through my agent (house listed under value, 0 offers for 70 days listing). That same day, someone else put an offer through. We went to multiple bid situation and put an offer $30K above asking. The asset manager apparently ‘liked’ our offer and we were in the lead. The home in question also had renters that were behind in their payments. Ultimately Fannie delisted the property and then the renters apparently paid their bills and then listed the property again – ONLY to have an offer accepted 12 hours later without notifying my buyer agent.

    Is this illegal? Unethical?

    I’ve called Fannie directly and reported the matter and waiting for a 2nd level call back. The house, in fact, is still showing as ‘just listed’ on

    Very shady. 0 offers for 70 days, 2 offers in same day, my final/counter was in the lead before they delisted and relisted the property in same day and then accepting an offer.

    Do I have any recourse? I can’t seem to get anyone to give me the asset manager contact info.

    • Melissa Zavala

      Hi Dominic. I’ve never heard of a situation where an REO has renters, although I have read that Fannie Mae was exploring this option. You can contact the Fannie Mae Escalation Desk, and see if they could help you. I’m not sure, but perhaps. Just Google “Fannie Mae Escalation Desk”. Good luck!

  24. We recently submitted an offer on a property as a Short Sale. Fannie Mae asked for double what was offered. The realtor is, also, a Fannie Mae Foreclosure Appraiser and filed an appeal, which was totally disregarded. What he submitted was practically a full appraisal. Fannie Mae foreclosed and listed it for 3/4 of their counteroffer, which is still out of sight.
    Now, I had been a mortgage broker for over 20 years. Retired from that long before the crash.

    I taught the Loan Origination Licensing classes, mortgage broker classes and continuing ed classes for both mortgage people and realtors. This I did for over 16 years. SoO I know my way around the industry.

    A closing attorney friend refused to let me retire and asked me to handle short sales for his firm. As of late, I have run into occurrences such as stated above and do not have much success with Fannie Mae.

    I believe there is a real problem with Fannie Mae. Unfortunately, if there is a watchdog, it is sleeping.


Leave a Comment