No. This is not a give away program run by the politicians. The homes being offered are foreclosures owned by Fannie Mae and many are in rough shape and not in the best locations. Therefore in order to get these dogs sold, Fannie is offering favorable terms and financing. A bank owned home needing repairs is very, very difficult to finance. A bank will not make repairs (it is already losing money on the deal) and a new lender will not fund a mortgage for a home needing repairs. Currently, this inventory is sitting on Fannie’s books as a non producing asset. There is no downside. Once it is sold, there is a new owner and cash flow where there is none today. As a taxpayer, I am happy to see this. All of these REO’s need to be sold in order for the country move forward economically.
“There is no downside.”
If these are non-productive assets, why not just auction them to the highest bidder, the way private lenders do?
Four years ago legions of politicians and financial advisers also claimed Fannie and Freddie had no downside risk.
Since then:
(1) Fannie and Freddie lost $125 billion in stock value.
(2) They required a $150 billion taxpayer bail out to stay solvent.
(3) The CBO estimates they will require another $135 billion bail out to stay solvent.