Only half of the
previously foreclosed homes owned by Fannie
Mae are either on the market or being prepared for sale. The
remaining properties are currently locked away in some step of the foreclosure
system.
The
National
Association of Realtors said in its existing home sales report
Wednesday that its officials were pressuring government agencies to release
more of their REO in markets short of inventory.
Many
market participants long claimed the government – including Fannie, Freddie Mac
and the Department
of Housing and Urban Development – are deliberately holding
these homes off the market in order to get more for them when home prices
recover.
Fannie
disclosed for the first time this year where these properties are in the
lengthy and complicated REO process. In its second quarter financial filing,
the government-sponsored enterprise said 23% of its more than 109,000
repossessed homes are currently available for sale.
That's
down from 28% at the end of last year.
An
offer has been accepted on another 19%, and 11% have an appraisal pending,
Fannie said.
But
47% of its inventory is unable to be marketed.
Roughly 14% of
Fannie's entire REO inventory is redemption status, meaning the time frame
borrowers and second-lien holders can redeem the property under various state
laws. The timelines vary and have come under much change across the country. In
Michigan, for example, lawmakers passed a bill last year to extend the
redemption period to as much as one year in some cases. The bill was referred
back to a state committee in March.
Fannie
said another 13% of its properties are still occupied by the borrower. The
eviction process just hadn't been completed.
Interestingly,
8% of its inventory – slightly less than 9,000 homes – are being rented as part
of its piloted Tenant in Place or Deed for Lease programs, where the home is
rented back to the borrower.
Its
other piloted program to sell roughly 2,500 homes to investors, who were
approved in recent months to rent the properties out, will close at some point
in the third quarter.
"The
properties we own are either on the market or in the process of being brought
to market. Fannie Mae's goal is to sell HomePath properties at market
competitive rates as quickly as we can so that neighborhoods stabilize and
recover," a Fannie spokesman said.
In
its financial filing, Fannie showed it's taking fewer losses on its REO sales.
The GSE recovered an average 65% of the unpaid principal balance from REO sales
in the second quarter, up from a low of 59% at the beginning of last year.
But
even this metric varies widely across the country. It was able to recover an
average 78% of the unpaid principal through REO sales in Texas but only 50% of
the original mortgage balance in Nevada sales.
Home
prices began to steadily improve in 2012, pushing profits up for the GSE. It
signaled to investors that the major hurdle holding back REO sales isn't its
own management of the properties but of mortgage servicer difficulties,
specifically at the five largest banks.
Fannie
sold only 5,000 more REO than the 43,700 homes acquired in the second quarter.
"We
continue to manage our REO inventory
to minimize costs and maximize sales proceeds," Fannie said in its filing.
"However, as we are unable to market and sell a higher portion of our
inventory, the pace at which we can dispose of our properties slows, resulting
in higher foreclosed property expenses related to costs associated with
ensuring that the property is vacant and costs of maintaining the
property."
