REO Property - Bank vs FNMA

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REO Property - Bank vs FNMA

Chris Garrett
Cave Springs, AR · Member since 2017 · 5 posts · 0 votes

I understand that the majority of loans in the US are backed by FNMA or FHLMC. What I'm confused about is what dictates who ends up with the property after it's foreclosed upon and becomes an REO. For instance, if the mortgage for a property is backed by FNMA and the property ends up as an REO, does FNMA now have possession of the property, or does it go back to the bank who originated the loan?

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Brandon SturgillBusiness Member
Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
7y

Fannie and Freddie don't back loans...FHA insures loans...Fannie and Freddie are more of a "pass through" and more involved with selling conforming loans and distributing cash...while a lot of folks see Fannie and Freddie as government entities, that's only a recent change...pre Dodd-Frank these guys were "quasi-government" and who knows what the hell was going on under their roofs. Here is a better overview: https://www.fhfa.gov/SupervisionRegulation/FannieM...

The banks that originated the loan has already packaged and sold it, so no further involvement from them...and there are long-standing broker relationships from a few large firms that represent almost all FHA-insured foreclosures...there is more to this, but this is the general overview @Chris Garrett

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  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    7y

    Fannie and Freddie don't back loans...FHA insures loans...Fannie and Freddie are more of a "pass through" and more involved with selling conforming loans and distributing cash...while a lot of folks see Fannie and Freddie as government entities, that's only a recent change...pre Dodd-Frank these guys were "quasi-government" and who knows what the hell was going on under their roofs. Here is a better overview: https://www.fhfa.gov/SupervisionRegulation/FannieM...

    The banks that originated the loan has already packaged and sold it, so no further involvement from them...and there are long-standing broker relationships from a few large firms that represent almost all FHA-insured foreclosures...there is more to this, but this is the general overview @Chris Garrett

    937-979-7000
    Realize Multifamily Group11 Review
    View Page
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  • Andy Mirza
    Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    When the property is sold at a foreclosure sale, the entity that takes title to the property will either be a 3rd part winner at the auction or the bank/lender/foreclosing entity. The last recorded Assignment of Mortgage or Deed of Trust and the foreclosing documents will let you know who's foreclosing. Following the Trustee or Sheriff's Sale, the "winner" will get a Trustee's or Sheriff's Deed, which needs to be recorded to transfer title.

    The vast majority of mortgage originators sell their loans off to others. Only portfolio lenders (those who originate and keep their loans) will take a property back as an REO.

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  • Chris Garrett
    OP
    Cave Springs, AR · Member since 2017 · 5 posts · 0 votes
    7y

    @Andy Mirza and @Brandon Sturgill

    Thanks for the additional details!

    One piece I’m still confused on then is how you end up with a Fannie Mae foreclosure (like on HomePath) if they are not holding any of these loans.

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  • Andy Mirza
    Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Chris Garrett:

    @Andy Mirza and @Brandon Sturgill

    Thanks for the additional details!

    One piece I’m still confused on then is how you end up with a Fannie Mae foreclosure (like on HomePath) if they are not holding any of these loans.

     That's a good question. My understanding is that Fannie and Freddie buy up newly originated loans, package them up into MBS, and sell them to Wall St, Banks, Pension Funds, Insurance Companies, etc. They back most of the mortgage market by providing liquidity on the secondary market. Maybe they have warranties with the bond holders to buy back defaulted mortgages. I'm only guessing but I'd like to know the answer as well.

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  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    7y

    HomePath says it sells Fannie Mae REO properties. https://www.homepath.com/

    HomeSteps says it sells Freddie Mac REO properties. http://myhome.freddiemac.com/buy/homesteps-home.html

    HUD says they sell FHA REO properties at https://www.hudhomestore.com/Home/Index.aspx

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