By Mike Colpitts
Hoping to slash the record volume of foreclosures in its inventory, Fannie Mae, one of the nation’s two mortgage giants is offering to pay buyers’ closing costs on foreclosed homes and accepting down payments of as little as 3%. Purchasers will receive up to 3.5% in closing costs assistance.
The inventive was announced by the government sponsored lender in an attempt to reduce its bloated inventory of homes foreclosed as a result of banks and mortgage companies underwriting mortgages to increase lenders’ profit margins at the height of the real estate bubble.
The lender’s inventory of foreclosed properties is eligible for special mortgage financing programs for home buyers attempting to purchase homes with as little as 3% for a down payment. The program has been the subject of controversy ever since it announced its minimum down payment offer, which is also an effort to incentivize home buyers to make purchases.
Similar low down payment programs, including FHA mortgages and 100% financing provided by banks are blamed for much of the foreclosure crisis, which has triggered more than 7-million foreclosures in the U.S. since the start of the crisis.
Offers to purchase properties must be submitted after April 11th and close on or before June 30, 2011. Buyers must reside in the home as their principal residence. Sales to investors are excluded from the program.
“Since interest rates remain low, the incentive will go a long way toward helping even more families buy a new home,” said Terry Edwards, portfolio manager of Home Path, Fannie Mae’s operation of foreclosed properties. Low mortgages rates, hovering below 5% on a fixed rate 30-year mortgage, however, are providing little relief for the housing market in terms of home sales, which remain sluggish with real unemployment near 20% nationally.