Home/Mortgages/Freddie Mac and Fannie Mae Lift Ban on Foreclosures

November 29 2010 (Chris Moore)
Freddie Mac and Fannie Mae have lifted the ban on the sell of foreclosed homes that had been frozen since the document handling fiasco that started nearly two months ago. Freddie Mac sent a memo to agents instructing them to “resume all normal sales activity” while Fannie Mae issued a memo telling agents to “proceed with scheduling and holding the closings” of foreclosed sales.

Fannie Mae also instructed agents to coordinate with appropriate personnel “if a title issue arises with respect to the potential defect of an affidavit used in the underlying foreclosure.”

Fannie and Freddie owned nearly 240,000 properties at the end of September, valued at nearly $24 billion. Analysts claim difficulty selling those homes could lead to higher carrying costs for the mortgage titans. Further delays also could prompt buyers that had been under contract to lower their asking prices or to walk away from deals altogether which could cause the mortgage giants to incur heavier losses.

In August, Fannie Mae told mortgage servicers that they would face fines if foreclosures became unreasonably prolonged in a bid to avoid costly delays.

The Federal Housing Finance Agency (FHFA) worked with Fannie Mae to make the decision after a thorough examination of foreclosed properties which the mortgage company has acquired. Although the actual reviews of the document handling fiasco have not been completed, it is believed that foreclosure sales may not reach the usual level of activity prior to the paperwork debacle.

“Our decision was motivated by several factors including the protection of buyers with title insurance, the negative impact lingering foreclosed properties has on neighborhoods and the cost burden that is placed on taxpayers when [bank-owned] sales are suspended,” a Fannie spokesperson said in a statement.

Fannie Mae said it would resume sales for properties with loans that had been serviced by units of Ally Financial Inc., Bank of America Corp., PNC Financial Services Group Inc., J.P. Morgan Chase & Co., OneWest Bank and Sovereign Bank.

Tags: fannie mae, freddie mac, foreclosed homes, title issues, mortgage servicers, FHFA, foreclosed properties, document handling fiasco, robo-signing