In previous editions of this blog, I have defined and
discussed foreclosures, REO’s and short sales (see February, 2011). I have taken the reader through an
exploration of HUD Homes devoted an edition to Fannie Mae and “Homepath.” All of these sources of distressed
properties can offer value and potential bargains. But, as I always say, it is solid analysis
that identifies great opportunities; and no single source of inventory can
always be presumed to provide winning purchases. Research is the key– current, accurate
research gathered and analyzed by someone who knows what he or she is
doing. Having prefaced this discussion
with that caveat, let’s take a look at another source of REO inventory: Freddie
Mac and its “Homesteps” unit.
Like Fannie Mae, Freddie Mac is a “government sponsored
enterprise” (a “GFE”), chartered by Congress for the stated purpose of
stabilizing the mortgage markets and expanding home ownership. There is currently much debate over whether
either of these entities has effectively fulfilled its mission– and even
whether these entities have actually harmed the real estate market by fueling
the “real estate bubble” whose collapse will be working its way through the
system for years to come… and causing a great deal of suffering along the
way. Indeed, in September of 2008
Freddie Mac was placed in conservatorship by its regulator, in an effort to
mitigate systemic risk and diminish a further erosion of confidence in the
system.
Freddie Mac does not loan money or write mortgages. Like Fannie Mae, Freddie Mac purchases
mortgages from banks on the secondary market.
The goal is to provide liquidity and stability by providing banks with
more cash to make more mortgage loans.
Of course, some of the mortgages Freddie Mac purchases go
into default and foreclosure. Enough
have done so in the last couple of years that Freddie Mac was placed in
conservatorship. And when a foreclosed
home goes into Freddie Mac’s REO inventory for resale, the Freddie Mac unit
charged with selling it is “Homesteps.” In the next edition of this blog, we will explore analyzing Freddie Mac properties, offering to purchase them, contracting for and closing their purchase.
