Fannie Mae’s Home Path program announced the reinstatement of the closing cost incentive to contribute 3.5% percent of the sales price towards closing costs on designated foreclosed homes. The Home Path program already allows for as little as 3% down payment, with no mortgage insurance and no appraisal. Also, to steer agents to show their homes over the thousands of other foreclosed homes on the market they are offering bonuses to the buyers’ real estate agents.
Back on my island, ruled by Gilligan, (his real name is the FED) it was determined that loan officers cannot make more than a set amount. Also, all borrowers are required to sign a new document (because the more forms you sign, the less chance you’ll end up in foreclosure) that mandates an anti-steering law. Loan Officers cannot “steer” a client to a program that has “risky” features, such as negative amortization or prepayment penalties. Uh, dude, those went away in 2008. And Gilligan, don’t all mortgages have a risky feature called a “due on sale clause”? I guess Gilligan forgot about the new comparison tool that most people use in today’s modern world: www.google.com
Sigh….I’ve regressed. Back to Fannie Mae or insert the name of the bank of your choice: they are above any law when it comes to selling homes. Over the past few weeks transactions have fallen apart because Fannie has refused to repair serious roof issues, remedy mold infestation and fix air conditioners, etc. If the buyer really wants the house, they are required to fix it themselves. If a first time home buyer spends their money on repairs, how are they going to make their payments? And if the buyer cancels the transaction, after blowing close to $1000 on inspections and appraisals, they just put the house back on the market and hope that the new inspections overlook the flaws. Or that an unsuspecting investor will buy it.
Fannie Mae chooses the title company with their special fees. On a Home Path Condo Loan we are closing today, the HOA charged over $1300 in various costs. Our first time home buyer was blindsided when she received the settlement statement. Also, Fannie Mae warrants the condo; while other complexes are watching their values plummet due to underwriting, appraisal and HOA requirements. Fannie Mae’s Home Path circumvents those pesky guidelines that the rest of the housing community are bound to follow.
Just so we are clear: Fannie Mae can steer clients to their homes by offering incentives while loan officers are not allowed to make any more or any less than the pre-determined compensation, no matter the loan amount or program (It may seem like a stretch, but think about it).
Like the old saying if you want fair, go to a fairground. But really, Gilligan has been on the island way too long with his wacky friends to think any of the above makes sense.