Has anyone else picked up on the Fannie Mae courthouse auction foreclosure below?I attended a foreclosure auction on the steps of Centreville Courthouse on the Eastern Shore of Maryland. The original mortgage holder, Countrywide ( later taken over by Bank of America) was stuck with the original loan for the home, the missed interest & Escrow payments, and all legal fees etc.
At the courthouse foreclosure auction the bids curiously went way over the fair market price of the property. I was totally mystified why anyone would pay so much money for the property, so later asked the Clerk of the Courts to see the documentation trail to follow the foreclosure process :-
The original over-inflated purchase price for the home paid by the first owner duringthe housing boom in November 2005 was $212,900, including a mortgage for$170,000. By the time the owner was in default in June of 2009 the outstandingbalance owed was still $168,501. By July 2010 this had racked up to $189,993including missing interest payments, Escrow debits, and unexplained butseemingly very lucrative ‘corporate advances’ made to the lender.
The bank then put the home up for auction at the Centreville courthouse where theysold the property for $198,178 (incl.commissions, fees etc). Not only did thebank get back their original loan, but they got enough money to cover all themissed mortgage payments, all their legal fees, and even made a nice littleprofit on the deal!
I later found out from court documents that the winning bid that paid well over thecurrent fair market price for this home was non other than Fannie Mae.
The town house then remained empty for months but a recent follow up investigation reveals that the propertywas finally put up for sale with a local real estate agent who sold it in July2011 for $160,000. That?s almost $40,000 less than the figure paid at auctionby one government subsidized organization to a government bailed out bank ? alldone with our money!
Loans are commonly assigned (transferred) from one lender/institution to another … and sometimes (particularly if loan is in default) at a discount to the outstanding debt (remaining $ amt owed) on that loan. In the case you described, Fannie Mae, was the last holder (beneficiary) of the loan before it went to foreclosure. NOTE: They did not “pay the $198,178” at auction, rather, as beneficiary, they put that loan up for sale at that amount.
As you outlined above, the beneficiary likely opening the bidding at “full debt” (total amount owned which includes penalties and fees). That was evidently the $198,178 amount you noted. At that “above market” price, there were likely no third party investors willing to bid and consequently it went “bank owned.” Fannie Mae (new owner) then handed off the property to their REO team and put it up for sale … ultimately selling it @ $160K. This scenario is nothing new … happens all the time. And yes, defaults can result in big penalties and fees that can rack up the outstanding debt quickly.? ?
Thanks for that explanation but I am still confused as to why the bank gets back all its loses & makes a profit on the deal. They can’t loose as the tax payer in the form of Fannie Mae is vaccuming up all the costs when the property is eventually sold back in the open market at a fair market price - I reality they could have got that amount at the original auction no problem - it would have saved months of time, extra legal steps, & $s in fees ? If you & I were in the role of the bank & Fannie & tried this on we would be up for fraud - no?
Fannie Mae is only going to get back the $160K the property sold for as an REO … less appx $3K in real estate brokerage expense and possibly less another $3K or so in “relocation agreement” ($4keys) expense if the property was occupied.?
There are some other institutions that have done well by buying up 1st position loans that are going into foreclosure, at a deep discount, (price paid is not readily avail to the public), and then taking the property back at a trustee sale (foreclosure) and later selling the property as a “bank owned” for what looks to be a loss (based on last public record of sale, house sold for much less and well below loans taken) but might, in fact, be at a handsome profit. All depends on how much of a discount the bene received when they acquired the delinquent loan.?
Notwithstanding any of the above…we all have a right to be miffed. Virtually all major lending institutions are alive today only by the grace of US Taxpayers. Were it not for the massive taxpayer bailouts, most of these institutions would have ceased to exist. Never got my thank you card … did you? ;)?
Countrywide made the loan, but Fannie was likely the lender. BofA likely took over the servicing rights (collecting the payments and forwarding to Fannie) from Countrywide. BofA foreclosed on Fannies behalf at the amount owed to Fannie (common). No one bid, so Fannie got the property back at the opening bid amount (the amount they were owed). No one actually paid anything at the time of sale, and Fannie didn’t make a profit. They simply got the house back. Whether or not there was really a loss will be determined when they resell the property as an REO.
Totally off topic but still related to Fannie Mae - why do they list houses for prices they don’t actually want. Ex. House listed at $169. I offered $200. Appraisal came in at $174. Since I’m fha bank only lends appraised value. They rejected. I offered $180 since I was already out of pocket inspection & appraisal fees. Deal was then terminated. Crazy part is it was then listed that night…again at $169. What???
? This is like Obama Care. ?We subsidize Fannie Mae’s poor business practice. ?Why would they not sell a property at auction possibly taking a small loss? ?The reason I believe is they are not held accountable for their decisions. ?If they where not bailed out by tax payers they would be out of business. ?I went to an auction where the note owed was $383K. ?I expected the opening bid to be $345K. ?This would be a 10% loss. ?The house was on the market for over a year and made it to $359K with no buyers. ?Then went to auction. ?If you where to look at this as an investment you would sell it and move on. ?Not Fannie Mae. ?They will now pay more Lawyers, Realtor and Repairmen so they can take more of a loss on the property. ?What happened to holding companies accountable. ?We need to stop the bleeding of our tax payer money.