The Federal Housing Finance Agency (FHFA) announced a policy change on Wednesday that would allow Fannie Mae and Freddie Mac to sell existing REO properties to any qualified purchaser at fair market value, which would be determined by the companies.
The new directive applies only to the single-family REO inventory of Fannie Mae and Freddie Mac as of November 25, 2014. The combined inventory of single-family REO properties for the two GSEs currently totals about 121,000, FHFA reported.
Previously, Fannie Mae and Freddie Mac required homeowners (or third parties purchasing on behalf of the homeowners) to pay the entire amount owed on the mortgage in order to buy their house back following a foreclosure. The new directive will allow both former homeowners or third parties representing them to buy back the house under a fair market policy that already applies to those purchasing other REO properties, according to FHFA.
"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. "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."
Fannie Mae's and Freddie Mac's current rules require former borrowers to wait a minimum of three years after a foreclosure to be eligible to receive another GSE-guaranteed loan. The current GSE rules also require the purchase of an REO property for a previous owner's benefit to be used by that previous owner as his or her principal residence.