If your neighborhood streets are lined with empty, foreclosed houses, Fannie Mae has some good news for you: The home loan giant is giving first dibs on its thousands of foreclosed homes to families who actually intend to live in the houses themselves or community organizers who intend to fix up the houses.
Under its First Look Initiative, announced Nov. 24, for the first 15 days a foreclosed property is on the market, Fannie Mae will only consider offers from owner occupants and buyers using public funds, like the billions provided by the federal Neighborhood Stabilization Program. Offers from investors will be considered only after the first 15 days have passed.
Because Fannie Mae buys up mortgage notes from banks, the financial company is one of the largest owners of foreclosed homes in the country. Fannie Mae had 72,275 foreclosed single-family homes on its books as of Sept. 30, according to its third quarter results.
Until now, these homes were sold to the highest bidder - in depressed neighborhoods, often that meant a real estate investor looking to turn a profit.
When speculators buy houses, the best neighbors can hope for is that the homes will be rented. From Philadelphia to Flint, Mich., property flippers are notorious for buying properties and letting them rot, waiting for the land underneath to increase in value while the windows break and a prairie grows in the front lawn.
The strategy works for speculators because, if they buy a house at auction at a steep discount, even a modest recovery in land values could double their money.
In ravaged neighborhoods across the country, houses have sat empty for years, even decades, as flippers waited for the best moment to sell their investments. Take the Harlem neighborhood of New York City, where until the peak of the real estate boom, hundreds of townhouses owned by speculators stood empty with cinderblocks in every window, because boards weren't strong enough to keep out vandals. In Newark, N.J., some speculators now cover their windows with painted steel plates.
Hopefully, ideas like First Look will help some of these "investments" once again become places for people to live.
