Fannie Mae program markets to owner occupiers

mjohnson@bradenton.comFebruary 21, 2014 

MANATEE -- The foreclosed home market is not an easy one for home shoppers who want to live in the houses they buy.

Rebecca and Kurt Austerman of Bradenton lost out on every home they bid on during their recent house search. Both Manatee County school teachers, the Austermans were making full-price offers on homes in their budget, including foreclosed properties.

They planned to finance any purchase they would make. It was almost their undoing.

"We kept losing out on houses where the owner was looking for cash buyers," said Rebecca Austerman, who teaches at Lakewood Ranch High School.

At the urging of their real estate agent, the Austermans started looking at homes in Fannie Mae's HomePath program. Foreclosed upon by the national mortgage backer, HomePath homes target homebuyers planning to live in the house they buy. The program shuts investors out of bidding on a home during its first 20 days on the market.

This week, the deal got better. Through the end of March, HomePath is offering buyers up to a 3.5 percent rebate to pay toward closing costs. The program requires down payments as low as 5 percent, and does not require buyers to pay mortgage insurance, according to the HomePath website.

The Austermans bought in January, before the incentive started. But, they're happy to be in their 1,100-square-foot, $105,000 home in Bradenton's Ware's Creek neighborhood. They don't even mind doing the updating and repair work that comes with owning a foreclosed home.

"We're having a great time," Austerman said.

Foreclosures have been the best deal on the housing market for several years. Manatee real estate professionals say that many of these properties are selling to investors who want to rent or flip them. The statistics bear that out: Flips increased by 55 percent between 2011 and 2013 in the county, while the inventory of foreclosed homes has dropped year-over-year since 2011.

In Manatee County, where 257 HomePath properties were on the market as of Thursday, buyers in the program are calling their houses home.

Wendy Herndon, a real estate agent with The Serena Group at Keller Williams' Bradenton office, said this is the program's intent. Fannie Mae started the HomePath program about six years ago as a way to put homeowners in houses, rather than leave foreclosed properties to be snatched up by investors looking to rent or flip them.

"Their thought is that this will bring the neighborhood up," Herndon said.

Herndon said Fannie Mae generally does more work in its foreclosed homes before they go on the market than she sees done in other bank-owned homes. That allows them to compete in a sector of the market where sales professionals are seeing few "scratch-and-dent" homes.

"With some other asset companies we've worked with, they don't set aside expenses to the same extent," Herndon said.

HomePath buyers do not finance with Fannie Mae. The company has a list of third-party lenders it uses in each state. Eligible lenders include Wells Fargo, Fifth Third Bank, and Regions Bank.

Like other foreclosed homes in the county, HomePath homes don't stay on the market long. Foreclosed residential properties in Manatee County are currently spending an average of 51 days on the market, versus 81 days

for traditional sales, according to MLS statistics.

Kimberly Roehl, the Michael Saunders & Co. real estate broker who helped the Austermans find their house, said next year may be too late to grab a foreclosed home.

"I don't think the numbers are going to be there the way they are this year," Roehl said.

The program may not be for people who want to deal. Roehl said Fannie Mae usually drops its list prices no more than 5 percent in a negotiation. She said the company prices its homes at the top of the foreclosure market, but below prices on the conventional market.

The houses also sell "as is," so buyers should expect to do some remodeling work, said Herndon.

That work can be paid for through a separate part of the HomePath program that offers remodeling loans on some HomePath houses. David Bolton, a mortgage banker with Movement Mortgage in Bradenton, said this allows a buyer to roll remodeling expenses into a mortgage.

"I don't think people realize how good of a program it really is," he said.

HomePath homes can sell to investors after the 20-day "first look" period is over. Investors pay 20 percent down.

Karen and Chris McClellan took advantage of both sides of the equation. They purchased their home in the River Place community in east Manatee through the HomePath program in 2011. Later, they bought another HomePath house as an investment property.

"It was a great deal," Karen McClellan said.

Fannie Mae does remove homes from its program when they fail to sell through traditional marketing. Those homes are sold at auction or in pool sales.

Matt M. Johnson, Herald business reporter, can be reached at 941-745-7027, or on Twitter @MattAtBradenton.

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