Fannie Mae and Freddie Mac are relaxing their policies on the sale of foreclosed properties to the former owners.
Under the pair of secondary lenders’ current policies, a borrower whose loan was foreclosed can only purchase the former residence by paying the balance in full.
The requirement also applies when another third party purchases the real-estate-owned asset on behalf of the former borrower.
On Tuesday, the regulator and conservator of Fannie and Freddie, the Federal Housing Finance Agency, announced a directive requiring a change to the policy.
As a result, existing REO properties can be sold to any qualified purchasers — including the former homeowner — at fair market value.
The notice indicated that current rules require that former borrowers need to wait at least three years to qualify for a Fannie or Freddie loan.
“The purchase of an REO property for the benefit of the previous owner must also still be intended for use by that owner as their principal place of residence,” the regulator stated.
The change effectively extends the fair-market value policy that was already available to other purchasers.
Only the 121,000 properties in the secondary lenders’ REO inventory as of Nov. 25 are impacted by the policy change.
Some exclusions could apply.
“This is a targeted, but important policy change that should help reduce property vacancies and stabilize home values and neighborhoods,” FHFA Director Melvin L. Watt said in the statement. “It expands the number of potential buyers of REO properties and is consistent with the Enterprises’ practice of requiring fair-market value for those properties.”
