Policy Change Benefits Those in Foreclosure

There is some good news for homeowners who have experienced the unfortunate event of losing their home to foreclosure. On Tuesday, November 25, 2014, the Federal Housing Financing Agency (FHFA) announced a new policy change relating to the sale of real estate owned (REO) properties in their current inventory. This change allows qualified purchasers to “buy back” their property at fair market value, as determined by Fannie Mae and Freddie Mac, the government sponsored organizations who purchase home mortgages.

Fair Market Value

How is fair market value determined? Similar to when your home was originally purchased, an appraiser would have evaluated the property. An appraisal will be done on your foreclosed home and a Uniform Residential Appraisal Report, Form 1004 will be completed. This standard detailed format will compare your home with that of recently sold homes in your same neighborhood. Fannie Mae will review the form to make sure that the report shows market value based on a “cost approach value” based on calculating the value on the land and what the cost to rebuild a house of comparable size and quality would be.

Before this change, a current homeowner undergoing foreclosure would be forced to pay back the entire amount owed on the mortgage in order to buy their home back. This would also be true of a third party wishing to purchase the home on their behalf. Under the new policy for the existing REO inventory, qualified homeowners or third parties are able to repurchase their homes back at fair market value. This change affects a targeted group of single family homes and each approval will be handled on a case-by-case basis.

“This is a targeted, but important policy change that should help reduce property vacancies and stabilize home values and neighborhoods,” said FHFA Director Melvin L. Watt. “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.”

What are the Requirements?

To qualify for this new policy change, you must have undergone a foreclosure. Your mortgage must be owned by either Freddie Mac or Fannie Mae. Also, your foreclosed property must still be for sale on the housing market. Another consideration is your credit report. Credit will be a factor in the opportunity to take advantage of this program. Purchasers must also wait a minimum of three years before they will have the ability to repurchase the home on their own. Lastly, the home must still be intended for use as your primary residence. Using the home as a rental or investment property will not be an option.

With this change comes new opportunity for some homeowners to return to their homes even after losing it to foreclosure. Millions of Americans were affected by the housing market crash in the early to middle 2000′s.

Although it is not an opportunity available to anyone who lost their home, it provides hope and a second chance to select homeowners that was not previously available.

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