Mr. & Mrs. Fannie & Freddie Dummies - Part 3
The march of the dummies continues on.
Here’s my big beef about Fannie Mae and Freddie Mac. They’re both quasi-government organizations.
Whoever is running the place, doesn’t really care about the quality of their performance.
Here is my first-hand experience as a real estate investor.
In the spring of 2007, a friend of mine turned over her house to me.
To make a long story short, a tragedy in her family left her with a huge mortgage she couldn’t afford.
She tried to sell her house for a year to no avail, so she got a $25K second mortgage from Countrywide to fix it up.
She then went to hire a new agent, and it sat for 6 months. No offers. No one could afford it.
At this point, there was nothing in it for her, so she was simply willling to walk away. I offered to negotiate a short sale with the bank, which in this case, was Fannie Mae.
My partners and I were able to negotiate down from $350K to $225K. Inspite of the fix-up, there was a lot of mold in the attic and all over the beautiful cedar siding.
However, Fannie Mae demanded that Countrywide should get no more than $1K from their 2nd mortgage.
But after months of haggling, endless phone tag games, and case reassignment, Countrywide wanted $5K.
As it turned out, it was fairly normal for each loss mitigation agent to work on 100 mortgages concurrently. You can just imagine how a $25K loan can easily get lost in the billions of mortgages that Countrywide owned.
In the end, the entire deal fell apart by the summer of 2008. The house has since been vandalized (since it was unoccupied), and its value could easily plummet another $100K within those long 15 months of haggling.
Had Fannie Mae looked at this case with some common sense, they could have cut their losses by accepting $225K. We had a buyer willing to pay $250K. Subtract the $5K for countrywide, and a profit of $20K for my partners and myself. My friend would have been saved from a foreclosure record on her credit score.
Everyone would have walked away with some benefit.
As of today, I would be surprised if the house can fetch ‘as is’ for $150K at the county’s foreclosure sale. This would completely wipe out Countrywide. My friend would now be forced to file for bankruptcy, and my partners and I would get nothing at all.
What’s wrong with this picture?
Can you see this scenario happening thousands, or hundreds of thousand times throughout the country?
Watch out for part 4 tomorrow.