Fannie Mae doesn’t lend money to homebuyers, so it doesn’t actually foreclose on them either. What it does is buy up mortgages from other lenders, providing what’s called a “secondary market”. This is essentially the same function performed by private securitizers; in fact, Fannie Mae was packaging its mortgages into “mortgage-backed securities” for years before Wall Street adopted the model. But Fannie Mae’s standards for the loans it will buy are supposed to be higher, so it’s generally assumed to be one of the good guys in the subprime/securitization foreclosure drama.
But Fannie Mae ends up holding a lot of properties as a result of mortgages originated and foreclosed by other institutions — 374 in Cuyahoga County at this moment, according to the Auditor’s database. A house with an FNMA-backed mortgage that goes into the sheriff’s sale with National City or US Bank as the plaintiff usually comes out the other end with Fannie Mae as the new owner.
What does Fannie Mae do with these properties? Generally, they sell them off through brokers. At the moment, for example, FNMA’s website lists 92 houses for sale in the city of Cleveland, at prices ranging from $4,900 to $114,900. (Go here and search for Cleveland.)
The Washington Independent’s Mary Kane wrote in January:
Most local officials in Cleveland reserve much of their ire for Fannie Mae, the government-sponsored enterprise that provides mortgage money…Fannie Mae enabling speculators and flippers? Oh yes. And here’s a new and striking case in point:
Neighborhood groups complain, however, that Fannie Mae, more so than other lenders, aggressively sells off its properties to out of town speculators…
The Fannie Mae manager of foreclosed properties in Cleveland is based in Texas and wasn’t available for comment, a spokesperson said.
Since the beginning of 2008 Fannie Mae has filed deeds of sale for 211 properties in the county. 118 of these properties are in Cleveland and East Cleveland.
Of those 118 Cleveland and East Cleveland sales, 54 — almost half — were to something call “RECA Limited Partnership”.
What’s RECA Limited Partnership? It’s a South Carolina operation that buys houses to flip them, and invites others to do likewise. From their website:
RECA Limited Partnership buys real estate nationwide, primarily through bank REO departments. These properties are then resold “as is, where is.” All properties are sold for cash or with an Agreement for Deed…That’s about the clearest business-plan definition of real estate flipping I’ve ever seen — right there on RECA’s index page. (I presume Fannie Mae staffers have web access.)
Since 2002, the principals have purchased and resold hundreds of properties nationwide and have built a thriving investment and real estate firm.
Whether you would like to buy a single property or invest in dozens, RECA Limited Partnership has a great opportunity for you!
The last dozen Cleveland transactions between RECA and Fannie Mae were filed on March 10 and March 12 — three on the West Side of the city, nine on the East Side. The Sheriff’s Sale prices listed for the twelve properties total $276,005 — meaning that their recent appraised values totalled as much as $414,000. (The Sheriff’s Sale minimum bid is 2/3 of the appraised value.)
RECA bought all twelve from Fannie Mae for $25,679. Not $25,679 each… $25,679 total.
Fannie Mae has a lot of good friends in this community, reportedly including Congresswoman Tubbs-Jones.
If you happen to be one of them, now might be a really good time to call up your friends at Fannie, point them to this post, and ask them what the hell they think they’re doing.
