HomePath® is the official foreclosure (REO) website for Fannie Mae. “HomePath” refers not only to the homes available for sale on the website, but also to a special loan program offered to eligible buyers for the purchase of Fannie Mae owned properties.
Loan Program to Be Discontinued
Fannie Mae recently announced that the HomePath® loan program will be discontinued. If you have a buyer wishing to buy a Fannie Mae HomePath® eligible home, you must have a fully executed contract prior to October 6, 2014. Currently Fannie Mae HomePath® loans allow for a buyer to put 5% down payment (owner-occupied), and incur no mortgage insurance expense; there is no appraisal on the property.
Contracts after October 6 will no longer have those special loan features, however a home buyer can still buy the Fannie Mae owned home using other financing such as FHA, VA, or a conventional home loan.
Fannie Mae Ethics Called into Question
I’ve written several articles over the years about some interesting and questionable programs and processes associated with Fannie Mae and the distressed property world.
In an article that I wrote of Agent Genius in February of 2014, I stated…
Over the last 12–18 months, short sales on Fannie Mae properties have not been easy. Valuations have come back exceedingly high, and negotiations to prove to Fannie Mae and servicers that their values are not aligned with market value have been challenging. With challenges in convincing Fannie Mae to agree to approve a short sale at market value, many additional Fannie Mae properties have ended up in foreclosure.
Last February , many people accused Fannie Mae of intentionally overvaluing their properties. As a foreclosure, Fannie Mae can list the property above the current market value, and seek buyers willing to obtain a HomePath® loan.
With the Fannie Mae HomePath® loan, no appraisal is required. With no appraisal, the buyer could pay 10% or even 20% over market value. Ironically, of course, the new owner of the Fannie Mae REO now owns a property purchased for more than market value; the owner is now underwater like the short sale seller that couldn’t get his short sale approved just a few months before.
With all of these interesting nuances of HomePath® loans and Fannie Mae owned (foreclosed) properties, perhaps the fact that the HomePath® loan program is coming to an end is not such a bad thing. Or… maybe Fannie Mae’s decision to wipe out the program is due to the fact that the number of foreclosed homes is diminishing. Either way, if someone wants to buy a home, there are plenty of other loans and plenty of other lenders—plenty of other fish in the sea.