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New Fannie Mae Guidelines - IF YOU BUY FORECLOSURES, this is YOU!

We got this news yesterday and thought I would share with anyone who has not seen the release. 

 

Title Defect – Mortgage Loans Secured by Properties Subject to Unexpired Redemption Period

Certain state laws provide for a "redemption period" after a foreclosure or tax sale has occurred, during which time the prior owner may reclaim the property upon payment of all amounts owed. Unexpired redemption periods create an unacceptable title defect on the subject property, and do not conform to the existing policy that requires the property to have "good and marketable" title. As such, Fannie Mae is clarifying the Selling Guide to state that properties with unexpired redemption periods have unacceptable title defects. Therefore, these mortgage loans are not eligible for delivery to Fannie Mae until after the expiration of the redemption period. The purchase of additional insurance, a redemption bond or similar coverage during the redemption period does not remedy the title defect and the mortgage loan remains ineligible for delivery to Fannie Mae.

This topic was also updated to remove the paragraph pertaining to FHA and VA mortgage loans. Lenders must follow the applicable federal agency’s requirements pertaining to allowable title exceptions.

 

Thoughts?  For me, as a wholesaler, it looks like prices will be dropping.  However, its going to be hard to retail a house that has foreclosed because the redemption period could be 9, 10 or 11 months away. 

 

Chris

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Keep in mind that in CA, NV, CO and other deed of trust states, this won't apply. CA specifically only applies in the event of a judicial foreclosure - an extremely rare occurance in this state.

Check your local statutes to see if your property is likely going to be subject to these restrictions.

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