Real Estate Information Archive


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Fannie Mae and Freddie Mac loans were exempt from the HAFA short sale program that was put into effect by the Treasury on April 5, 2010.  Fannie Mae has just created its own version of HAFA with regulations that you can find at  Similarly, Freddie Mac has created its version of HAFA with regulations you can read at

Does this addition to HAFA make you happy?  In general, the terms are similar to the Treasury's short sale program that is supposed to expedite the review and approval of short sales by pre-approving the seler for the short sale and establishing the amount the lender will accept at the time the Short Sale Agreement (SSA) is entered into.  In other words, you qualify the seller and get the amount needed from the sale at the time you list the property.  However, there is a difference with Fannie and Freddie.  With the Treasury's program, the lender considering the short payoff may tell the Realtor how much they will settle for.  For those of you who do a lot of short sales, they will specify the amount they want to be paid at closing as shown on line 504 of the HUD.

In the Fannie and Freddie program, the servicer is prohibited from telling the seller, buyer and Realtor what this amount is.  Instead, the servicer will establish an asking price based on the condition of the market in the area.  Who is better at setting an asking price: (1) the Realtor who works there every day or (2) a Loss Mitigation negotiator with files from all over America?  When the contract is submitted, you hope that this asking price results in the Minimum Acceptable Net Proceeds (MANP).  If you do HAFA short sales, you have to love the acronyms :-) .  

Having the Broker Price Opinion or appraisal already done at the time the offer is presented is a benefit, and the servicer does not tell the Realtor what the acceptable net proceeds are in most of the non-HAFA short sales (except for FHA short sales where you know to the penny).  So, in this manner the program gives a benefit of the BPO already being done and the same result as the old fashioned short sale where you play "guess again" on the amount the lender wants.  But, it could have been better if Fannie and Freddie followed the Treasury's lead.

The other bad news is that the servicer tells the Realtor how to market the property, and supervises the marketing plan.  Again, who knows better what will work (1) the Realtor who has developed an effective program or (2) the loss mitigation negotiator who just took the HAFA training course.   The guidelines mandate that the marketing program includes " a "For Sale" sign, Multiple Listing Service(s), flyers, print ads, open houses as well as appropriate usage of the internet;"  Few will argue with a for sale sign and putting it in the MLS, but open houses work less than 2% of the time according to NAR statistics.  Print ads have dramatically fallen because they are not that effective.  However, if you want to comply with the Short Sale Agreement you will do these things, because the agreement can be cancelled if you violate it.

Another problem is that a seller cannot be considered for a Fannie or Freddie HAFA short sale if a foreclosure is pending that could sell the property in 60 days, or if the state laws would allow a foreclosure in the next 60 days.  States like Texas can go from a dead start to a full foreclosure in less than 60 days, so does that mean you cannot do a Fannnie or Freddie HAFA short sale in those states?

There are some great benefits.  The servicer must respond to an offer within 10 business days.  That beats the months of waiting we do now.  The servicer must allow at least 45 days to close the sale after approval, with a maximum of 60 days.  Also the foreclosure must be postponed during the sale period, wich is at least 120 days. 

The financial incentives are similar. The seller gets $3,000 in moviing assistance.  The servicer gets more under Fannie and Freddie than the Treasury by receiving $2,200 for an approved short sale, as opposed to $1,500 for the Treasury. 

So, like everything else in short sales, there is some good news and some bad news.  But, at least there is a program that provides some tools that a savy Realtor can use to help a borrower in trouble.

If you need an encyclopedial of information on short sales, go to and for the complete  Fannie Mae guidelines go to and for the Freddie Mac guidelines go to

posted by Tim Burrell -  Treasury Secretary Henry Paulson and Federal Housing Finance Agency Director James Lockhart  held a press conference today, Sunday, to announce that the government had placed Fannie Mae and Freddie Mac under conservatorship.  After meetings with the Board of Directors of both organizations,  the Federal Housing Finance Agency  took control of these institutions that are vital to financing of home purchases. 

Fannie Mae and Freddie Mac are government sponsored enterprises (GSEs) that are involved in more than half of all the real estate financing in the U.S.  They do that by buying loans from banks and packaging those loans as Mortgage Backed Securities, and selling the securities.  By selling the loans to Fannie and Freddie, the banks get fresh capital to make new loans.  The sale of mortgage backed securities by Fannie and Freddie has been hurt by concerns overt sub-prime loans and the higher than normal default rates on mortgages.  In other words, the buyers of these securities are scared by the reports concerning the sub-prime loans and the increase in foreclosures.

Fannie and Freddie are involved in 5.4 trillion dollars worth of mortgage debt.   To give you an idea of how huge that is, it is more than the amount of the privately held national debt of the entire United States.  In the past four months, Fannie Mae and Freddie Mac have been involved in 80% of the financing of home purchases.  In short, if you want to get financing to buy a home, there is an 8 out of 10 chance that you will need Fannie Mae and Freddie Mac. 

What did the government do?  They replaced the leadership of these two organizations as Herb Allison, a former vice chairman of Merrill Lynch, was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp, was picked to head Freddie Mac.  The hope is that the rest of the staff will remain in place, and Fannie's Daniel Mudd and and Freddie's Richard Syron, the  former leaders of each organization, have agreed to stay on during the transition. 

The government is going to buy $5 billion in mortgage backed securities held by Fannie and Freddie.  This will provide a quick infusion of capital for each organization.  The Treasury Department said it will immediately be issued $1 billion in senior preferred stock from each company, but eventually the Treasury could be required to put up as much as $100 billion for each company if the funds are needed to keep the companies afloat. This continuing support  guarantees that each organization will remain solvent, assuring that financing for real estate purchases will not be thrown into chaos.  The government also will receive warrants representing ownership stakes of 79.9 percent in each firm.   The existing stockholders will be subordinate to this obligation to pay the federal government, so the 36 billion in outstanding stock for these companies just moved down a notch to be in second position to the federal government.  This puts those shares in the position of junk bonds according to Standard and Poor's ratings.  

In the long run, the government wants to shrink the size of Fannie and Freddie, with their portfolios shrinking by 10% per year starting in 2010.  All lobbying will cease, all dividends will stop and other cost cutting measures will be instituted to make these institutions more efficient. 

What will that do to Raleigh Real Estate?  In the past few months, some mortgage rates were dropping, but the rates on loans associated with governmentmal agencies were not, as Fannie and Freddie could not pass along the better prices to consumers.  The conservatorship will probably lower the cost of these loans associated with governmental organizations, so new buyers may get better rates.   It will also guarantee that these loans will continue to be available.  When I watched GMAC financing close their doors to new loans in the Triangle, I was concerned about the availability of new loans.  Now, I am not, as government will infuse up to $100 billion into Fannie and Freddie to see them through. 

One of the biggest problems in the real estate industry is the availability of financing.  This move makes financing more certain, and lets Realtors stop worrying about whether they can get loans for their customers.  Just the certainty that loans are available is valuable, and the prospect of getting better interest rates is appealing.  For example, the interest rates on these loans just dropped one half of one percent, lowering a buyer's monthly payments and allowing them to qualify for to buy a more expensive house.

The loss to the taxpayers is debatable, as we just got preferred shares in companies that will do well in the long run.  My hope is that the projections of a $25 billion loss to the taxpayers is highly inflated, and the taxpayers may even make a profit from the preferred shares that pay 10% interest.   

In general, this is good news for the real estate industry and benefits the stability of Raleigh real estate.

Posted by Tim Burrell - President Bush just signed the Housing and Economic Recovery Act of 2008.  The first thing I noticed is that some first time homebuyers may need to hurry.

If you are a buyer that does not have 3.5% downpayment and you want to buy some Raleigh real estate,  you have to buy before October 1, 2008.  The program where sellers can arrange for downpayment assistance ends on that date.  If you are a first time home buyer, you can get an amazing benefit of a tax credit of 10% of the purchase price of the home you bought, up to a maximum of $7,500.   This is not just a deduction to reduce the amount of income you have.  It is a tax credit, i.e. it is directly lowers your taxes.   For example, if you buy a home that is worth $100,000, you get the maximum tax credit of $7,500.  If you were going to pay $17,500 in income taxes, you reduce the amount of tax you pay to $10,000.  So, you can buy a home with no money down and get up to $7,500 off your taxes. 

There is a catch.  You have to pay back the tax credit over 15 years, with no interest, or if you sell the house for a profit.   That is not so bad.  Where else do you get an interest free 15 year loan. 

The bill provides $300 billion in financing to allow people who got bad loans to refinance with FHA loans.   If you want to refinance the mortgage on your principal residence, the payments on your current loan have to be more than 31% of you income, the legislation's line of being unafordable.  I have paid over 31% of my income in housing payments for all the decades I lived in California.  The loan had to be taken out before 2008, so it is not meant for newly acquired loans.  The maximum loan is $550,400.  The loan cannot exceed 90% of the appraised value of the house, so the existing lender may have to take a short payoff to make the deal work, if the value of the home went down.  Since the values of Raleigh real estate are holding strong or going up, this provision should not be of major importance to our area. 

Again, this relief comes with a catch.  If you accept this refinancing, you have to share some of the profit with the FHA when the house sells or is refinanced.  FHA gets 100% of the profit if it sells, or refinances,  in the first year, and the amount for the FHA goes down by 10% per year until it reaches 50% for the FHA. 

The legislation also props up Fannie Mae and Freddie Mac.  The sudden decrease in the value of their stocks shows that the investment community has lost confidence in these institutions that are extremely important to financing in the US.  Since these two have an interest in nearly half the loans in the US, their stability greatly affects housing.  The legislation increases the lines of credit for these two and authorizes the government to buy their stock if necessary to give them additional support.  The loan limits for Fannie and Freddie were also raised to 115% of the areas median home price, not to exceed $625,500.  The last part does not have a dramatic effect on Raleigh real estate, as it will be a long time before the median price in Wake County will get anywhere near that limit.

There is one other provision that foreign investors like.  Under existing law, they had to fill out a form with their social security number and give it to the seller.  Now, they give the form to the closing agent and do not have to reveal their social security number to the seller.  Since the dollar is so low compared to foreign currency, there may be an increase in foreigh investors who purchase Raleigh real estate, so this provision may have some affect in our area. 

New Loan Limits are Coming


Posted by Tim Burrell - As a part of the new stimulus package recently signed by President Bush, the loan limits for Fannie Mae, Freddie Mac and FHA loans were increased to 125% of the median price of a home in the area, up to an amount of $729,750.    The Department of Housing and Urban Development has released the increased limits for the state of California yesterday, and the limits for other states are expected to follow in short order.   The new loan limits are set county by county for the entire state.

What does this mean for North Carolina, particularly Triangle real estate?  The initial projections were that it would probably mean very little.  Most of the counties in North Carolina have homes where 125% of the median price is still under the old limit of $417,000.  All of the four counties in the Triangle fit into this category. 

However, it just came out today that the loan limits for Wake County went up from $224,000 to $295,000 and the loan limts for Durham County was raised to $331,000.  So, there are more homes that can use FHA, Fannie Mae and Freddie Mac loans (called GSE loans).  This will help Triangle real estate, particularly Wake County real estate and Durham county real estate, as homes that are priced near $300,000 to $350,000 will have better financing available to encourage their sale.



Help Raleigh Real Estate: Contact Your Senator!


Posted by Tim Burrell - The Senate Finance Committee has approved an economic stimulus package that does not include an increase in the limits for loans by Fannie Mae and Freddie Mac (commonly called GSE's), and does not include an increase in the limits of the guarantees allowed by the FHA.   The stimulus package passed by the House of Representatives in HR 5140, the Recovery Rebates and Economic Stimulus for the American People Act of 2008,  includes increases in the amount of Fannie Mae and Freddie Mac loans to 125% of the median price for homes in high cost areas, with a cap of $729,750.  The House bill would also allow FHA to guarantee loans up to 125% of the median price in high cost areas, with the same cap.  This increase would be temporary, as it would expire at the end of they year.

Now is the time to contact your Senator and explain the obvious: THE PROBLEM IS REAL ESTATE LOANS, STUPID

The main source of the economic problems, and possible recession, is the lack of availability of real estate financing.  The exotic loans that used to allow a segment of the market to buy homes do not exist any more.  The standards for qualifying for nearly all loans have been raised, a second shrinking of mortgage funding.  With the increase in housing prices in many areas, conventional loans that are limited to $417,000 or less do not allow "regular folks" to buy a home in those areas.

The House bill would allow the limits on the conforming loans that "regular folks" need to go up.  This would allow more people to buy houses in the areas hardest hit by foreclosures.  The National Association of Realtors projects that this increase would prevent about 200,000 foreclosures nationwide.  Decreasing foreclosures would help consumer confidence, not only in the housing market but in the economy in general.

It is hard to imagine any reason for the action by the Senate.  The problem is a sudden decrease in the availability of real estate financing.  Why not deal with that problem by providing a short term increase in that financing?

The House bill would increase the availability of loans, and cost the consumer nothing.  The Sentate is concentrating on giving money from the US Treasury to taxpayers, and proposing amendments to give money to recipients of Social Security, both of which will eventualy cost taxpayers.  The money given to consumers will be used to buy consumer goods at WalMart and Best Buy.  We need something that will allow consumers to buy houses.  Also, the increase in loan limits is temporary, so that it is not a long term authorization which means any potential problems are limited in duration.

This difference between the House of Representatives and the Senate gives you a better appreciation for our form of government.  The Founding Fathers wanted to have a body in the legislature that was more in touch with the people, and they created the House of Representatives.  The Senate has only two members from each state, and focuses on larger pictures, but is less in touch with what is happening with "regular folks".

The National Association of Realtors is making an effort to have Realtors contact Senators to point out this mistake.   It would be even more important for consumers who are not Realtors to contact their Senators, so that the national importance of this mistake is felt, and the Senators cannot dismiss this as a self serving effort by Realtors.

This increase in the conforming loan limits is not as important to Raleigh real estate, and all of the real estate in the Triangle.  A loan of $417,000 will buy more than the average home in this area.  But increasing these limits will allow more people to buy the more expensive Raleigh real estate and Cary homes, and move into a Chapel Hill house.  More importantly, this increase will help the areas in the United States that have large amounts of foreclosures.  Decreasing foreclosures will be good for the entire economy, which will help our area.

Please contact your Senator and ask the Senate to face the problem head on.  Since the problem is a decrease in real estate financing, provide a temporary increase in that financing.

Posted by Tim Burrell - One of the reasons for the decrease in the number of home sales in California, Florida and other high priced areas is the decrease in available financing.  The Triangle homes and houses in of the rest of the country are selling using loans that are associated with Fannie Mae and Freddie Mac, as they are able to stay within the limits allowed for those loans, so called Conforming loans.  The loan limit is $417,000.   Other loans are guaranteed by the FHA, with a lower limit of $362,000.  These programs do not do much for buying a home in California and Florida, unless you have a huge down payment.   But, those are the areas with an abundance of foreclosures.

Last week, an agreement was reached between the leaders of the House of Representatives and the White House to raise the Conforming Loan limit.   Some of the people involved in the agreement must not have taken good notes, as House Republican Leader John Boehner said they were raising the limit to $625,000 while House Speaker Nancy Pelosi said the limit would go up to $729,750, so the conforming loan limit for GSE's (Government Sponsored Entities)could be one or the other or someplace in between.  They were on the same page when they said that the FHA loan guarantee program would be expanded to a new limit of $725,000.  The increase in the conforming limit was supposed to be for one year, while the increase in the FHA guarantee would be permanent.

However, they forgot this thing called two house legislature, an idea that Thomas Jefferson, Ben Franklin and James Madison thought was important.  What about the Senate, the other part of the legislature?   Senator Richard Shelby of Alabama, a prominent member of the Senate Banking Committee, wants to tie the increase to the passage of legislation to increase the oversight of the GSE's.  That may work out, as the House of Representatives has already passed HR 1427, a bill that would provide for that increase in oversight.  Senator Chris Dodd of Connecticut, the chairman of the Senate Banking Committee, has stated he will support passage of legislation that would reform the oversight of GSE's and expects it to pass later this year.  So, if the Senate passes legislation similar to HR 1427, the oversight may come into effect, and maybe all parties will follow through with the increase in the loan limits. 

But, Senator Dodd wants to go farther by creating the Federal Homeownership Preservation Corporation, and fund it with $20 billion to purchase loans from lenders, allow homeowners to refinance into fixed rate government backed mortgages.  This proposal is designed to prevent foreclosures and allow more homeowners to keep their homes.   However, the White House does not want this added to the Stimulus Package, which is what Senator Dodd would like to do.

What will the White House do?  In the State of the Union Message tonight, President Bush urged the Congress to pass the legislation that would reform Fannie Mae and Freddie Mack, and modernize FHA.  He did not include anything about increasing the Conforming Loan limit.  He also urged the Congress not to add additional costs to the Stimulus Package, indicating he would oppose Senator Dodd's efforts to ceate the Federal Homeownership Preservation Corporation.  So, will the loan limit increase go into effect, or will it get bogged down in confrontation over the items in the Stimulus Package and reform of the GSE's and FHA?

If the Senate will get the oversight it wants and the White House gets the Stimulus Package it wants, then maybe  the House will get the increase in the limits it wants.  What will the nation get?

The National Association of Realtors estimates that if the limit of conforming loans is raised to $625,000, it will prevent between 140,000 and 210,000 foreclosures, as well as have a positive effect of 2 to 3 percent on home prices.   Those who oppose this legislation say it will  weaken the ability of the GSE's to help low and moderate income families.  Others warn that if this legislation passes and the conforming loan limits were increased, then it would increase the risk to the taxpayers just to benefit the wealthy.

Most Raleigh real estate can be purchased with the current conforming loans, and those Raleigh homes do not need the increase in the loan limit.  However, there part of the Raleigh real estate market that is slow is the part that is priced over $400,000.  So, increasing the conforming loan limits will make more financing available for that price range, which will help to decrease our inventory of higher priced homes.

The other benefit to increasing the loan limits will be to aid the markets in the areas with the largest amount of foreclosures.  If this decreases the number of foreclosures in those area, there will be less doom and gloom about the real estate market, and that will help all of us.

If the biggest problem with the economy is the lack of financing for real estate, you would hope that the politician would pass some legislation that would provide for more real estate financing, particularly for states like California and Florida, where most of the foreclosures are occuring.  It is only logical that if what we need is more financing for these areas that the politicians would provide that.   But, logic and government frequently do not coincide.  Lets hope they do this time. 

I enjoy your opinions, so feel free to comment. 

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