Fannie Mae’s evil plot exposed

Real Estate Agent with Highline Residential

Just in time for Halloween, I want to tell you something scary that’s no ghost story. Over the last few weeks, I’ve laid the groundwork for today’s topic – Fannie Mae – and their sinister plan to change the world!

OK, maybe that’s a little dramatic and overstated – you tell me.

Two weeks ago, I told you that everything depends on the appraisal and how low appraisals can cause a sale to be cancelled. Low appraisals are also keeping market values lower and stagnant (although we’ve seen a 13.5% increase in value in the last year in Las Vegas.)

Last week, I referenced a report that showed that nationally, we could be back to our record home values (set at the height of the market in 2005) by 2015. The logical question is, “If appraisals are keeping prices lower, how will we reach record values in a little over two years?”

Some folks think that Fannie Mae is taking the bull by the horns and forcibly changing the market. What exactly is Fannie Mae? Click HERE for the detailed answer.

The short answer is Fannie Mae buys (or securitizes) the mortgage you take out from a bank, so the bank has more money to lend to more homebuyers. The loans are underwritten within the guidelines set by Fannie, to ensure the loans are viable. There is another entity called Freddie Mac, which has the same focus and responsibilities.

They are both called GSEs (Government Sponsored Enterprises) and they’re chartered by Congress.

According to Fannie Mae, one of their main functions in today’s market is to help distressed homeowners, through their website, The solution that many homeowners choose is a short sale, which is the best way out of a bad situation.

If the homeowner chooses to ignore all means of assistance, they’re going to lose their home to foreclosure (a lousy alternative with harsher consequences.) Does that knock Fannie out of the game? Nope. Now the home becomes part of Fannie’s arm called, which sells Fannie Mae foreclosed homes.

At face value, everything looks great, right? Not according to accounts from Realtors all across the country. Homeowners trying to short sale their Fannie Mae homes are in greater jeopardy of foreclosure now more than ever.

For homeowners trying to short sale their home with a loan owned by Fannie Mae, once they have an offer, Fannie sends an appraiser out to validate the value of the home. What is becoming an increasing trend, is that Fannie is requiring a purchase price for anywhere from 15 to 25% above market value. Why? To increase home values across the country and a bigger profit for Fannie Mae.

While that’s good for values, it’s bad for the short seller. Normally, lenders will lower their requested value if the buyer supplies an appraisal supporting a lower value. This only applies to buyers getting financing for their purchase, not cash buyers.

Yet Fannie has been refusing to lower their requested “net” – even with substantiated lower values. Is this bad for Fannie? Quite the contrary. If the home doesn’t sell as a short sale, they foreclose – and then it becomes a home.

With Homepath, Fannie Mae offers their own financing AND there’s no appraisal for their mortgages. That means no matter what the home is priced at, the buyer will not be protected by a lower-priced appraisal. It’s a win for Fannie and a losing proposition for the home seller (who got foreclosed on) and the buyer (who is overpaying for the home.)

The only winners are Fannie Mae and the neighbors whose home values increase.

In Arizona, this practice is so rampant that the local NBC affiliate did an exposé on exactly what’s happening, click HERE to watch.

How aggressive is Fannie being with their price increases? Here’s a current example: I sold a home in Summerlin as a short sale that closed on 12/30/11 for $94 a square foot. The homes in this subdivision have since sold per square foot for $99, $100, $92, $94, $112 and $131.

Two weeks ago, Fannie Mae listed the home next door as a home for $160/sf. The difference between the two homes – a slightly smaller floor plan and a swimming pool. Now let’s change dollar per square foot to sales price.

My buyer bought their 2,542 square foot home for $240,000, without a pool – click HERE to view. The Homepath home is 2,448 square feet with a pool for $390,500 – click HERE to view. If this home closes at list price, my client next door will have a net increase in value of $166,720 – in just 12 months. That’s a 69% increase in value.

So who lost big time? The former owners who got foreclosed on. They had the home listed as a short sale for $215,000, which was $88/square foot (obviously too low based on the neighborhood comps.)

What’s the moral of the story? If you’re going to short sale your home and Fannie Mae is the investor holding your loan, pick your short sale listing agent carefully. You need someone who is aware of what’s happening and is prepared to fight to get your short sale approved for market value. Let Fannie raise the prices on someone else’s home, not yours.

Have a great week!


Re-Blogged 11 times:

Re-Blogged By Re-Blogged At
  1. Ginger Harper 10/28/2012 08:38 AM
  2. Brian Sharkey 10/29/2012 12:07 AM
  3. Diane J. Ebbers 10/29/2012 12:10 AM
  4. Cyndi Carver 10/29/2012 01:12 AM
  5. Monica Hess 10/29/2012 01:29 AM
  6. James Minkley 10/29/2012 03:11 AM
  7. Michael Layton 10/29/2012 04:22 AM
  8. Derek McClintock 10/29/2012 08:46 AM
  9. Paul Francis 10/29/2012 03:07 PM
  10. Sylvie Calder 11/03/2012 05:37 AM
  11. Ryan Jennings 11/07/2012 10:10 PM
  12. Chandler Real Estate Liz Harris, MBA 01/27/2013 02:21 PM
Real Estate Sales and Marketing
Nevada Clark County Las Vegas
Short Sale Specialist Network
fannie mae
short sale values
property values
las vegas real estate

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Ann Steinemann
Russell Realty,Westlake, Ohio 419-602-0339 - Westlake, OH

Mark, very interesting and enlightening article to what may be happening in some markets. In the Northeast Ohio market, we did not experience a rapid rise in home values so we did not have a real estate bubble burst. However, we do have a lot of people who lost jobs and then lost their homes as a result of not having sufficient income to pay their mortgage. I am seeing more Homepath properties on the market but they are typically below market value. Homepath properties are also usually fixed up prior to putting them on the market so they are in better condition and consequently worth more than other distressed and even some non-distressed homes on the market.

I believe the comment from #136 makes some excellent points and offers a balanced look at what is going on throughout the United States with the economy-real estate being a major player in that economy. Pointing fingers and creating fear-driven, knee-jerk responses won't solve anything. It's important to look at the big picture of where we are, how we got here and how we can work together to stabilize the economy through real estate sales. Our job as Real Estate Professionals is to facilitate the home buying and selling process for our clients. We do this by educating  sellers so they price their homes competitively so they will sell and buyers so they do not purchase homes that are overvalued for our market.

Oct 31, 2012 01:44 AM #147
Lynn Ganster
Morris Williams Realty - Orlando, FL

I am definitely seeing this in my market.  With my short sale listings as well as with my buyer offers.  I have represented FHA financed buyers who have had significant price reductions on Fannie Mae homes who chose not to use Homepath financing and when the properties were appraised at $30K under agreed upon purchase price the seller reduced the contract price (immediately) and deal back on. The buyer was aware that she could be paying more than we analyzed the value to be and she was willing to do that but with appraisals coming in low all over my market it was a risk she was willing to take because our inventory is so low, we looked for a long time and she became very well educated and she needed to move.  Every day is a new learning curve and now all the pieces fit together in print.  Poor sellers for sure!  They can't understand why their lender bank won't accept their generous short sale never makes sense to them because they can't see the whole spectrum and they are not out purchasing so have limited exposure to that side.

Great post and thanks!

Oct 31, 2012 08:23 AM #148
Mark Montross
Catamount Realty Group - Burlington, VT
Listing and Buyer Specialist

My one and only experience dealing with a Home Path property was with a cash buyer and a two week closing. Offer was accepted and then it was 'hurry up and wait'. The buyer's father was dying and he had to go out of the country unexpectedly. He rushed to get a power of attorney before leaving. The closing was delayed for months and months and months. We never did find out the reason and finally the buyer decided not to sign another extension after seven months of waiting.

Nov 01, 2012 09:13 AM #149
Sylvie Calder
Realty ONE Group - Scottsdale, AZ
Realtor®- Scottsdale, Phoenix & Paradise Valley AZ

This is SO TRUE! I see that everyday in Phoenix and Scottsdale!

Thank you for this great post Mark!

Nov 03, 2012 05:26 AM #150
Cathy McAlister
Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento - Sacramento, CA
Sacramento DRE#00648507

Is the Real Estate community being played like a violin again?  Just when the lenders are gleefully getting the word out that Short Sales are better than foreclosures, along comes a twist behind the scenes where we all begin to notice changes in the approval process for short sales (not that it has ever been a very clear path).   I am of the belief (conspiracy?) that FNMA is banking on home prices continuing up in many markets into 2013.   What better way to not allow a short sale to happen (no matter how good the current offer is) than to counter a ridiculous amount; convinced that they will receive more money from bringing it back as an REO sometime next summer.  They are more than flush enough to foreclose and hold all their properties.  Yes, all of them!   When the market was sliding, sure they would take the best offer of the day.  For now, I think the public mantra is more shorts, the policy mantra will be more foreclosures.   

Nov 04, 2012 04:23 AM #151
Realtor Lynn

Makes me sick.  I have been working for& not with the banks all along.  

Nov 04, 2012 07:21 AM #152

I'm really curious about what's going on with Fannie. We just lost our house to foreclosure, but get this: We bought at the peak for 402k, went into foreclosure early this year and they couldn't sell the thing as a short sale for 265k this last September. Went to auction for the loan balance of 381k middle of October and, here's where the confusion enters, Fannie bought it for themselves for 432k!! WTF? What's that all about?

Nov 04, 2012 02:23 PM #153
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

The manipulation is disgusting.  Right now people need homes and they are being held off the market to drive prices up.

Nov 05, 2012 09:09 AM #154

Very informative and enlightening article. The Phoenix market is especially vulnerable to overpriced HomePath homes due to our severe shortage of inventory. Some buyers are desperate to get into a home, and may be willing to buy an overpriced HomePath home without an appraisal barrier.

Nov 06, 2012 10:31 AM #155
Short Sales, Foreclosure & Bank Owned Real Estate

Mark very well said, great post! thank you for so interesting information!!

Nov 07, 2012 05:32 AM #156
Roseanne Campagna
John L. Scott RE Maple Valley, WA - Maple Valley, WA
Kent/DesMoines/Blk Diamond/Renton/Maple Valley, WA

Had this happen to me too. The weird thing is the FHA appraisal stays with the home for 6 months and pretty much locks everything up. Can't get the appraisers to compromise and can't get the lender to compromise so huge gaps in valuations.

Buyers suffer and so do the sellers... it's almost as if they are attempting to increase their property holdings and have even more control over the markets.

This feels illegal to me...

Nov 07, 2012 09:04 AM #157
Cindy Mustafa
The Mustafa Group - Aurora, OH

ULTRA KOODOS! You're my hero and I hope you don't mind if I repost. Getting this word out is key!

Of course, like the others, it's happened to me! I felt 'violated' I thought I was alone, with no one to talk to, no where to turn to. I should of come to AR.

Thanks for this post, I owe you one!

Cindy Mustafa


Nov 08, 2012 07:26 AM #158
Mark Karten
Highline Residential - Manhattan, NY

Hi Cindy,

Yes, please re-post anywhere you think it will help spread the word.

Again, I want to thank everyone who has posted here, emailed and called me with your stories of what's happened to your clients and you personally.

I am working on getting the national press to pick up the story and do their own investigation as I think the evidence compiled here is pretty clear.



Nov 08, 2012 08:51 AM #159
Rachell Lara & A List Properties
eXp Realty / 619.316.7445 - San Diego, CA
A List Properties - San Diego Neighborhood Experts

Thanks for this posting Mark. We have been experiencing this with the Fannie Mae Foreclosures here in San Diego, the governement says they don't want another housing bubble, but yet they are asking buyers to purchase with essentially 125% loan. I thought the crazy days were over, but no it just seems they have a new name Homepath Loan.  

Nov 27, 2012 12:17 PM #160
Curtis Van Carter
Better Homes & Gardens Wine Country Group - Yountville, CA
Your Napa Valley Broker Extraordinaire


Thanks for this heads up. I will look to see if it is happening here in the Napa Valley. Found this from a repost by David Hughes, cheers cvc

Dec 01, 2012 01:51 AM #161

Have a short sale with 95k offer, fannie mae through Nationstar ask for 135k. get appraisal done for value of 96k and we counter offer to 96k. Fannie Mae comes back with offer of 119k and when we submit appraisal again and comps stating this is highest and best offer, they reject it and tell us to re-list the property. How can you go against that? Have been told by other services to not bother getting an appraisal. Has anybody out there been able to get them to agree to market value? 

Dec 12, 2012 04:51 AM #162

We had problem with fannie mae in CA.  We had short sale going through, with a cash sale, second mortgage company agree to take small amount.  Fannie suddenly wanted about $8,000 more they said they hadn't figured realty fees.  Realtor asked them to reappraise as houses were selling for less, they sent out appraiser and now wanted more money (double) They said it appraised higher.  Realtor submitted another buyer willing to pay above the asking price, with a loan.  Fannie said no, it was to late and force a public auction.  House sold for about $20,000 less then first offer and $50,000 less than second offer and second mortgage company got nothing and therefore I still owe them.  Diane

Feb 22, 2013 06:11 AM #163
Cyndi Carver
PRSI Choice Gallery Homes - Bellevue, WA
Newcastle & East Renton Specialist

It is interesting. As a BPO agent, Fannie Mae's guidelines for BPOs are much more stringent and it's almost impossible to truly represent the short sale value, as they require that we not use short sales. A comment that the short sales drive the market is unacceptable and we really have to explain alot for using a short sale. They will allow the use of a bank owned sale on occasions. One cannot give depreciated value for it's condition. If it's a dump, you have to find 3 dumps for sale and 3 dumps that have closed. If there are none, then you have to use non-dumps and you can't mark your value down because it wouldn't be supported by the listing & sold prices.

Feb 25, 2013 05:10 AM #164
Tony Russell


You are 100% correct.. I like when folks tells the truth.. I have found that over the past year all of Fannie Mae properties are over price by 15 to 40%... This is an adopted trend will all of their properties.. Not sure about

Freedie mac..Other Banks, VA & HUD etc are using open bid (auction sites) so prospective buyers can now see other potential buyer price offer bids and by doing this will ensure the property will always sell over initial MLS asking price with the limited amount of properties on the market, everyone is trying to get that 'property' and bidding their life savings away to grab a piece of the american dream, before its going, going, gone, like many moons ago with buying frenzie..

Mar 08, 2013 12:13 AM #165
Brad MacKenzie
Brad MacKenzie - Duxbury, MA
Turning Houses into Homes on the South Shore

The same burden-shifting manipulation is behind the current structure of interest rates. Buy at 3.5%.  If the talking-head hype (pap) we are hearing everywhere were to happen, and rates were to rise to 4.5%, the value of all the homes around you could fall as consumer purchasing power shrinks. While that loss may be offset by a growing economy, chasing a hot market right now could turn out to be a serious error.

Apr 06, 2013 05:40 AM #166
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