FANNIE PUSHING HOMEPATH REO’S SALES

In a press release issued today, Fannie Mae announced that it is incentivizing the market participants to buy their swelling portfolio of REO properties by the end of the year. Selling agents of REO properties purchased from FNMA’s HomePath will receive a $1,500 bonus per sale. This is over and above the 3.5% refund of the final sale price that the homebuyer receives. The push, however, is that the home purchase must be completed by the end of the year to be eligible for these incentives.

So, it looks like Fannie is FIFOing REO inventory. From previous announcements, Fannie has been pushing servicers recently to foreclosure on properties where the borrower occupant has not been working to either modify their loan or transfer title in a deed in lieu - in a July speech, Edward DeMarco, acting director of the Federal Housing Finance Agency, told loss mitigation servicers that, "if you have an abandoned property or a borrower not willing to discuss or work with anything, then get going [and foreclose]”. Now, in order to clean up the books before the end of the year, Fannie is looking to pay their sell brokers an extra vig to move product.

Back in February, Fannie began the 3.5% incentive to buyers of its HomePath properties. HomePath, Fannie’s in-house manager of its foreclosures, also allows for special financing, which could allow buyers to purchase these properties with 3% down.

So, this could spell a bit of a bubble in cash-flow to securitizations which hold the Fannie Mae REO assets. However, with the glut of REO inventory on every servicers books, and HomePath prices not being anything special, it is unclear whether a $1,500 kicker will really help move product. But then again, in this market, any little thing may help.