Fannie Mae REOs giving peril to Shareholders

July 23, 2008 by · Leave a Comment
Filed under: Industry News 

Bloomberg ran an article discussing the glut of REO properties that are sitting unsold . So far this has amounted to $5 billion dollars of unsold homes. In the article, they mention a home that sold for $110K in 2005, at present they could not get it to sell at $6,500.00. They mention that prices are falling so a quick sale at the reduced price is better than no sale at all.

Prices increased too quickly compared to wages, now we are seeing a situation where the mortgages don’t support what the homes are actually worth in real world value. You may think that $110K is a good deal for a house in Flint, Michigan but when you look at the availability of jobs that can support that mortgage payment, you will realize the price is actually overvalued. Here is a snippet of the original article.


Fannie Mae, the largest U.S. mortgage finance company, couldn’t find a buyer who would pay $6,900 for the three-bedroom house at 1916 Prospect St. in Flint, Michigan. So broker Raymond Megie, who is handling the foreclosure sale, advised cutting the price to $5,000.

Megie still couldn’t sell it. “There’s oversupply,” he said. The home sold in 2005 for $110,000.

Fannie Mae acquired twice as many homes through foreclosure in the first quarter as it sold, regulatory filings show. Unsold properties may weigh on the company’s stock, which lost almost half its value since June 5, said Moshe Orenbuch, managing director of equity research at Credit Suisse Group AG in New York. Late payments on the company’s home loans, a harbinger of foreclosures, almost doubled in the past year.

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