The Pros and Cons of New FHFA Foreclosure Policy

The Pros and Cons of New FHFA Foreclosure Policy

Don't you just love how fresh and hopeful 2015 feels? It’s a new year, full of second chances! Especially for those of us whose homes went into foreclosure in years past. The Federal Housing Finance Agency (FHFA) introduced a new purchase policy at the end of November, 2014, that makes new allowances for home-owners with Freddie Mac or Fannie Mae mortgages who went into foreclosure. These home-owners (or anyone buying the home back for them) now no longer have to pay back what they owed on their previous mortgage. By the way, VA mortgages do not apply to this rule.

(Photo Credit: Home Repair Resource Center)

This policy relates to existing Real Estate-Owned (REO) properties owned by Freddie Mac and Fannie Mae nationwide as of Nov. 25, 2014. These mortgage bigwigs have more than 120,000 REO properties, some of which are still occupied by the former home-owners (only now as renters).

These new allowances won't be as easy to access as one would think, though. Homeowners may still be accountable for outstanding liens against the property (mechanic’s lien, property lean tax, or mortgage lien, for instance). Each state will treat those instances differently according to each case. For now, these home-owners need to get title insurance in the unfortunate event that a lien holder steps in to try and re-lien the property. The home owners’ Real Estate agents should also familiarize themselves with local laws and speak with local title companies to be able to advise home-owners professionally.

Here are some tips if this new rule applies to you:

1. Save as much cash as you possibly can. You might have to go up against competition who may want to outbid you for your home in today’s low-inventory market. Cash is key.
2. Get title insurance pronto. You don't want some guy coming out of nowhere with claims to your property. This insurance will make sure your home remains yours.
3. Know your local laws. Ask your realtors, title agents, and read up on the regulations to know your rights and limitations within this new rule. You might be surprised on how your state handles outstanding liens. This knowledge will better-prepare you for how to gear up in the battle for your home (or to NOT pay what was previously owed).

Lastly, remember how I mentioned VA mortgages do not apply to the new FHFA REO policy? That, unfortunately, leaves our foreclosed-upon service members in the dust. They are already at a disadvantage when it comes to renting out their home since the rental market is oversaturated in military communities, so they lose out. Many of us at the Claus Team are either former military, married to former military, or both, so it saddens us that our military friends are finding themselves at a disadvantage yet again.

(Photo Credit: The Peoples Voice)

If you are facing foreclosure and need advice, especially pertaining to this new FHFA REO rule, call us today or sometime this week and we can chat. We are constantly familiarizing ourselves with local law to help your home-buyers and home-sellers out and make you informed, confident consumers. We are waiting for your call! (210) 566-6355.