I was very pleased to learn last Friday that Fannie Mae is using a new addendum for their REO properties.
As you may know all banks use their own addenda for REO sales. For many years now Fannie Mae has been using basically the same addendum which stated that the buyer MUST use the seller's title agent and that the cost of transfer taxes and stamps would be bourne in full by the buyer. Fannie Mae is in fact EXEMPT from the payment of transfer taxes and stamps, although some local jurisdictions push the entire burden on the buyer without taking the exemption into account. The burden on the consumer for the payment of all transfer taxes and stamps, as you might imagine, can sometimes make or break a deal.
The addendum has been dramatically changed in that it now states "The closing shall be held at a place so designated and approved by the Purchaser". This is an absolute turnaround from previous versions wherein it stated that the purchaser MUST use seller's title agent! Additionally, the contract no longer states that regardless of local custom Fannie Mae will NOT pay any portion of the transfer taxes and stamps! These two major changes have long be awaited by those of us who do REO work in Maryland.
The net effect of this new addendum is that the buyer can now make his/her own selection as to title agent and will then be better protected against any prior title defects. The fact is that the seller's title agents do not do 60 year title searches because they are not required to. In most cases the title agent who is "representing" the seller is merely acting as a liasion between Fannie Mae and the buyer. Even in cases where the seller's title agent is doing the closing they still don't do a full title search. I have been told time and again that the only thing they (the seller's title agent) do is to get the title report from the foreclosure attorney who has reviewed title from the date of the foreclosed deed of trust forward.
Additionally, and most importantly as far as the consumer is concerned, is that Fannie Mae will split the transfer taxes and stamps, AND, they won't use those transfer taxes and stamps costs as part of the buyer's closing cost credit!! This is a huge win for the consumer.
It is my hope and belief that with the advent of the new HUD-1 all REO sellers will be forced to make the same changes in their addendum, specifically as it relates to the purchaser selecting their own title agent. I would urge those of you who do a lot of REO work to review any addendum that comes across with the contract to see if your seller has made similiar changes.
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