If you are a Realtor or short sale negotiator who has done a short sale with Fannie Mae as the investor during the last few months, this blog post will likely raise a question or two. For 
everyone else, it will definitely also raise an eyebrow or two. Government conspiracy theorists are certainly not a rarity in this day and age. Depending on who you speak to, many of our fellow citizens can come off as paranoid and irrational when speaking about all the secret plans they seem so sure our government and those in power are plotting and planning. While the theory I'm proposing on here is certainly not up to par with the New World Order, Illuminati, One World Government folks, it is certainly some concerning and valid food for thought, especially for those of us in the Real Estate and Mortgage industry. Take a few minutes to read this blog post, and you'll likely agree and come to find that this really isn't about a conspiracy theory, but a very real and disturbing trend that is happening in our housing market right now.
Lets take a step back here and set the stage. Over the last five to six years, we have seen real estate prices plummet in virtually every market across the country. This reality of the depressed housing market is certainly no secret. In many areas, prices have declined to as low as thirty cents on the dollar. Several years ago, As things became more and more depressed, our government stepped in. Both Fannie Mae and Freddie Mac, who back the majority of our residential mortgage loans, were completely bailed out by the US government. This forced overtaking was something that our government had to do, as the imminent collapse of Fannie and Freddie would have meant the complete collapse of the housing and finance industry, likely permanently. This was extremely important, as instead of giving bailout loans to Fannie Mae and Freddie Mac, like the auto industry or the banks,
they actually took complete control of these organizations. Our government then established the Federal Housing Finance Agency (FHFA) to "oversee" these organizations which are now referred to as Government Sponsored Enterprises, or GSE's. Since then, the FHFA consistently dictates policy to these Government Sponsored Enterprises that still back most residential mortgage loans and completely control the secondary mortgage market.
Now back to the present. Fantasic news headlines in much of the country that in many of the markets that were hardest hit, prices now seem to get going up almost as quickly as they were once declining. Inventories are low, demand is high, properties are getting multiple offers from buyers paying over list prices the minute they come on the market. But for those in the industry such as myself who are active in the short sale and distressed property niche, an interesting and disturbing practice that has been taking place.
In very recent times, just in the past few months, short sale agents across the country have been having difficulties with Fannie Mae short sales. To be more specific, the difficulty has been with wildly inflated appraised property values that Fannie Mae has been insisting on for short sale properties. For those who may not know, we are not talking about regular appraisals, traditionally ordered by a buyers lender in order to justify a purchase price. In this case, we are talking about appraised values that Fannie Mae places on properties, ordered by them and completed by their own appraisers, utilizing their own appraising and property valuation methods. Utilizing these over inflated appraised values, Fannie Mae then demands more money for these short sale properties from patient buyers. Anyone starting to smell the stink yet? Does this stink smell a little similar to the stink we all experienced several years ago with inflated buyer appraisals from before the housing market collapse?
For the most active short sale agents across the country, the past few months have produced quiet a few headaches with Fannie Mae. It seems virtually every property valuation and appraisal done by Fannie Mae for a short sale is at least 10% or more above current market value. Values so inflated, that there are typically no comparable sales at all to come remotely close to justifying their prices. Prices so high, that it most cases it would be virtually impossible for a buyer to find a loan and get an appraisal that would match the property values and prices that Fannie Mae is demanding. The ironic part, is that these same buyers' loans who are purchasing these properties would of course eventually be sold off to... You guessed it, Fannie Mae! Because of the massive number of loans backed by Fannie Mae, this is widespread and is effecting a very high percentage of current sales. And when it comes to disputing these inflated values, it can be quiet a challenge for real estate agents and short sale processors to convince Fannie Mae to change their mind and sell the properties for actual market value.
Put two and two together, read between the lines, and it makes perfect sense that this is just Fannie Mae's and our policy dictating governments' valiant and likely effective attempt at mass, government controlled real estate price fixing. Control the supply (market inventory), control the demand (interest rates ect), and then control prices and force up property values by demanding more money. Fannie Mae and Government controlled real estate price fixing. The tail wags the dog, and the dog has no clue what is going on. A perfect example of the reality that housing has become completely socialized, but with the illusion that its just all part of the market cycle. Just my two cents, for what its worth.
Click Here for my original article on Government Real Estate Price Fixing
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Comments
This is still going on and in fact has become worse since July 2013. I have lost ten deals since July due to over-inflated values. That is ten houses where we had true hardships and ready and able buyers. FNMA is trying to falsely raise up real estate prices. What in fact what they are doing is causing empty, decaying houses to sit in neighborhoods for months, or years. These properties are all then being foreclosed on and are then driving down the neighborhoods. I wish someone would explain to me the logic in this process. Americans are not being helped, they are being hurt by FNMA. Something needs to be done to stop this. If anyone has any suggestions or insight, please let me know.
This is an on time comment. If I may add, I am bothered with the fact that when Fannie Mae offers a foreclosure for sale under the HomePath financing program, then no appraisal is required. Here we go again with greed, abuse and cleverness.
All of my pending Fannie Mae listings have now been countered with stupid values. It seems that there are a lot of people trying to make a voice heard but I happen to think we all need to pull together and we Realtors will be heard. Mike posted a petition - how many actually clicked thru to sign? I did. Then I emailed it to everyone in my contact list - especially sellers with FNMA loans.
FannieMae is doing nothing other than "allowing" Realtors to do all the legwork and paperwork gathering (required to mitigate a loan) and then...no closing....no paycheck.
All real estate professionals must band together to make enough noise to be heard!
I cannot afford working on so many files for free - I just received my fifth ridiculous counter this morning. That's five files that will most likely NOT close.
Thanks everyone for taking the time to comment on this and address this issue. NOW is the time to take action and make a difference! Here is a petition we are putting out directly to the White House! First, Please go here and sign this petition demanding that Fannie Mae SHAPE UP NOW!
Go Here!
http://wh.gov/VY24
Next, PLEASE share this article and the above link on Facebook, Twitter, LinkedIn, Google + and all social media networks!
We NEED 150 signatures to become visible, but we want 100,000! Thanks for taking a few minutes to take action and make a difference. We do not have to stand by and watch this!
Mike
And yes, I have an agent on my team who does BPO's for Fannie Mae, and he is NOT allowed to use Foreclosures or Short Sales as Comps!! It really isn't a "brokers price opinion" when the brokers opinions DOESN'T MATTER and they use unethical means to place a false value on a property.
Its like saying "give me your opinion, but it has to be the opinion I tell you to give me"!
This is scary! I just mentioned on a webinar Wednesday the reality that Fannie Mae may be plotting deeper! I noted the fact that for Homepath financed Fannie Mae REO properties, they don't need an appraisal at ALL! This is and ADVANTAGE for them to foreclose and "name their price".
I also noted the fact that last year Fannie Mae Fired ALL of their 3rd party REO asset management companies and now does ALL REO outsourcing directly themselves. This is HUGE, and will mean MILLIONS more properties directly financed using HomePath if they "push" homepath even more!
Now, as Fannie Mae has recently partnered to do direct short sale listing assignments, COULD the NEXT step be that Fannie Mae starts offering buyer appraisals for FREE for SHORT SALES if buyers use their Fannie Mae Homepage financing??
Mike
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Here is an email that an agent on here just sent me that further helps make this a big possibility:
"Mike your post is very timely. I am working a short sale with PNC Mortgage and they said Fannie Mae is the investor.
PNC mortgage ordered a BPO and then they came back with a high value that I feel is out of line. I spoke to the agent afterwards that did the BPO and he stated he was INSTRUCTED to NOT use and short sales in the BPO.
Didn't we already go through this junk before?
I found it so interesting that Michael J. Williams the former CEO of Fannie Mae who just stepped down from Fannie Mae joined the board of directors at Prospect Mortgage. The CEO of Prospect told me this himself. HMMM is it because Prospect Mortgage is the largest Homepath lenders? Gee does Prospect know some inside information from Mr. Williams? Is Prospect getting preferred treatment?
Why is Fannie Mae trying to falsely inflate value? In the past I have contacted the Appraisal Institute and their team of attorney's over this stuff.
It is not ethical to inflate the values by NOT using short sales. I told the manager at PNC I will be back when the lender's appraisal does not come in.
What is your course of action?
sincerely,
Catherine Gheen"
Here is an email about this matter that I just sent out to some members of the media / press -
Dear , As a member of the press & media, I wanted to reach out to you for assistance in getting some attention to this matter. This article shows clearly that at this moment, our government, through Fannie Mae & Freddie Mac is attempting to artificially inflate real estate prices across the Country. Please read all of the comments below the post as well from home owners and agents who are dealing with this. There are MANY other comments and evidence in other forums where it is posted - activerain.com/blogsview/3589527/government-controlled-nationwide-r.... Please let me know if you have ANY questions about this or if there is anything you can do to draw some attention to this matter. As the director of a 12,000 agent short sale broker network, it is certainly easy for us to show how widespread this practice is right now. Thanks for your time, have a blessed day!
Mike Linkenauger
Director of Operations
(904)733-4911
Another disturbing reality is that agents and appraisers are using FANNIE'S guidelines to give "appraisals" and "Brokers Price Opinions", when the are NOT really appraisals (opinions of value) OR "BROKERS price opinions" if the brokers AND appraisers legal and ethical methods of valuation are NOT being used!
Mike Linkenauger: "Fannie Mae & Freddie Mac back over 60% of US residential home loans..."
Ok -- thanks. You'll have to excuse me -- I'm in Southern California (Orange County) and many of our loan amounts go well above the conforming limits. It's very rare HARP 2.0 is able to help because of the lower % of Fannie/Freddie loans here.
As mentioned, Fannie/Freddie/HUD REOs make up less than 10% of the market. However, I can now see the potential impact from your numbers.
My previous post describes the pricing strategy to likely result in stale REO listings and failed short sales if anything. Maybe that's what they want?
Just to be clear, I'm not disagreeing or agreeing with the notion that FNMA wants to control market prices by listing homes 110% - 1120% of FMV.
The disagreement comes from the METHOD that they want to accomplish higher prices in markets.
As Realtors, "pricing 101" has proven that simply OVERPRICING a listing doesn't translate into obtaining the highest offer for our sellers. If that were the case, FSBOs would be king and all they'd simply do is ask a ridiculous amount.
In most markets, Sold-List % usually is near 98%. But that doesn't mean that whatever we list at it will command 98% of the price.
Overpriced listings are shown less. Overpriced listings become STALE and must sell for less than it would've when it was new to the market.
Yes, we are in an appreciating market, but does that mean simply HOLDING the asset is a good idea?
Not necessarily. It's a NON-PERFORMING note. Not only are you not gaining positive cashflow, but you likely are cancelling any appreciation gain from the opportunity cost and fees that are adding up from property taxes, code violations, HOA dues, etc.
Does anyone think the powers at FNMA are smart enough to know this?
Mike is correct. Combining Fannie Mae, Freddie mac, FHA, VA, USDA, etc., the US Government owns, insures or guarantees (i.e. controls) around 95% of all the 1st residential mortgages in the country. The current actions by Fannie Mae and now Freddie Mac and the consistently high FHA appraisals on HUD homes are clearly attempts at manipulating the housing in order to fabricate a "recovery" that does not exist. Don't kind yourself. All of this is coming straight from the White House. For 4+ years we have been fed the "green shoots" line about the economy turning around. Keeping with the grass analogy, if the economy was a lawn you could fire the lawn mower person as the entire lawn is nothing but mud and horses**t. No green shoots here, but there will be lots of foreclosures. Of course the Wall Street hedge funds that are forming daily to buy distressed housing will benefit from this and be sure kick a share back to the great Obama. After all, he has already received more Wall Street money than any president in US history. Why not keep rewarding them?
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