Selling a home in a down market like this one is not a prospect that appeals to many homeowners. But what about selling nearly 65,000 of them?
That is the task Fannie Mae faces as it repossesses houses that have been through foreclosure. As the owner or guarantor on a third of all of the nation's home loans, the mortgage giant has to take over, renovate and sell a growing number of properties.
"Our No. 1 strategy is to sell them one-by-one," says Gabrielle Harrison, Fannie Mae's vice president of foreclosure sales.
But that strategy is both time and cost intensive. Many of the homes are left in disrepair, or have been vandalized as former owners move out.
Selling Foreclosed Houses
On average, Harrison says, the company spends about $10,000 per property to fix it up for sale. Then Fannie Mae has to assess the price and manage the sale. In all, Harrison says, it's taking the company an average of 90 days to sell a home — even in some of the nation's most distressed areas like California, Nevada and Florida.
The real challenge for Fannie Mae, which since last year has operated under government conservatorship, is that it has two mandates that sometimes conflict. On the one hand, it wants a quick sale so it can reduce its exposure to the housing market. On the other hand, it doesn't want to price homes so low that it ends up undercutting the prices of other homes.
"Our main philosophy is to preserve communities and maintain property values," Harrison says. Doing so, she says, means identifying the exact right price for each home.
Arriving at that price, however, can feel like pinning down a moving target.
Leveraging Technology
Pat Mahoney manages Fannie Mae's valuation team, which uses software that integrates several real estate databases and Google Maps to evaluate various markets around the country. Even with all that data, it's hard to gauge a market that's still falling quickly in so many places, he says.
"Florida — I don't know that we know where that's going," he says. "It's more than likely going to get worse. Nevada looks dire. Arizona — certain zip codes and certain parts of Arizona are bad."
Meet The New Landlord
In January, Fannie Mae started a new rental program, allowing tenants living in foreclosed properties to continue to live there with the company as their new landlord. The company has some 1,800 tenants living in foreclosed properties, and to date it has secured 20 signed leases.
"Having a tenant is good for neighborhood stabilization," because tenants take care of their homes and participate in the community, says John Bauer, director of the company's rental operations. Homes that are occupied also tend to fetch better prices when sold, especially if the buyer is an investor, he adds.
But all the properties, whether or not they have tenants, must be sold. And most of Fannie Mae's sales have to be handled remotely — far from the company's Dallas sales operations — by relying on local real estate agents who help handle the sale.
Managing Sales
Sitting at her cubicle, Shirley Mastenbrook, one of Fannie Mae's sales representatives, can access a list of recent foreclosures, and can assign local real estate agents to handle the sale. She reviews photos sent back to assess any need for renovations, finds local vendors to fix the homes and finally reviews the offers and counteroffers that come through.
In the nearby Dallas suburb of Mesquite, Mastenbrook gets a rare, in-person glimpse at a property that represents a relative success story for the company.
When it was repossessed, the walls featured not only outdated wallpaper, but also some prominent holes. Kitchen appliances wouldn't function, and worse: The pool was overgrown with sludge and tadpoles. In all, at Mastenbrook's direction, Fannie Mae spent $20,000 renovating the three-bedroom home before selling it to Myrna Lopez, the new owner, in January.
"We love it," says Lopez, a single mother of three, who, prior to buying the house, was forced to move in with her mother after losing a job and selling her previous house at a huge loss.
"I do feel bad for the previous owners. I think about them every now and then," Lopez says. "And because I almost foreclosed on my previous home, I know how it feels, and it's the most horrible thing you can go through."
In the first part of this series, Yuki Noguchi looks at Fannie Mae's Dallas-based office, where the company processes hundreds of thousands of troubled home loans to decide who gets a loan workout and who doesn't.
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