Buy Your Next Home From Uncle Sam

By Eric Fox | June 29, 2010 AAA
Buy Your Next Home From Uncle Sam

Americans that are brave enough to buy a home despite persistent predictions of a double dip in housing may want to contact the Federal government, as the recession and financial crisis has turned Uncle Sam into one of the largest owners of real estate in the United States. (Interested in investing in real estate? Check out Simple Ways To Invest In Real Estate and Foreclosure Opens Doors For Real Estate Investors for more information.)

Rising Foreclosures
The housing bust has led to an unprecedented number of foreclosures in the United States. In May 2010, 322,920 foreclosure notices were filed against homeowners, and more than three million homes have been seized over the last five years from delinquent borrowers. (It is possible to come back from the edge. Learn more in Avoid Foreclosure: Properly Handling An Underwater Mortgage.)

While most may assume that banks are the only source of foreclosure efforts, the U.S. government also owns a large number of residential properties due to its large role in buying and guaranteeing mortgages. Many of these properties are held due to the conservatorship established over the Government Sponsored Entities (GSE) back in 2008.

Freddie Mac
The Federal Home Loan Corporation, or Freddie Mac as it is more popularly known, owned approximately 45,000 multi and single-family homes at the end of 2009. The company put a gross value on these properties of $5.13 billion. Freddie Mac obtained these properties by being the highest bidder at foreclosure auctions when the properties collateralize loans owned by the company, or when owners just transfer the property to Freddie Mac without going through the foreclosure process.

Freddie Mac is furiously attempting to dispose of these homes, and has been fairly successful as the company's weighted average holding period for real estate owned is less than one year. The company markets the homes through HomeSteps, where buyers can search by state and city for homes to purchase.

Fannie Mae
The Federal National Mortgage Association, or Fannie Mae, is also a large owner of foreclosed property. The company owned more than 86,000 single family homes at the end of 2009, with a balance sheet value of $ 8.5 billion. These homes are concentrated in states that were ground zero of the housing bust, with 28% if the inventory in California, Nevada, Arizona and Florida.

Fannie Mae also markets these homes intensively, and sold 123,000 in 2009. The company's official web site to sell homes is called HomePath, where buyers can conveniently look up inventory near their location.

Other Agencies
Another source of inventory owned by the government is from the U.S. Department of Housing and Urban Development (HUD). HUD obtains its properties through a foreclosure auction on a Federal Housing Administration (FHA) insured loan. HUD also has its own web site at Hud.gov/homes.

Next up is the Federal Deposit Insurance Corporation (FDIC), which owns its inventory through its role in seizing failed banks. The FDIC owns single family homes but also has large amount of other properties including industrial and commercial properties, and raw land. The web site is located here.

The Department of Veterans Affairs and the U.S. Department of Agriculture also have a role in financing and guaranteeing home loans so both own single family home and other inventory. Buyers can look for their dream home here on web sites set up by these agencies as well.

Buyer Beware
Buyers shopping for homes from the government should be aware of the disadvantages of the process. Many agencies offer properties "as is" with no warranties on the condition. There is also little flexibility on negotiating the terms of the contract if the government accepts your offer. Fannie Mae, for example, does not accept offers for houses that are contingent on a buyer selling a currently owned home.

Bottom Line
The U.S. government is one of the largest homeowners in the country, with thousands of single and multi family homes in its inventory. These properties were either seized in asset forfeiture operations or foreclosure, and various government agencies are desperately trying to unload these through auctions or online listing. Buyers should check out the government inventory before signing that contract.

(Catch up on the latest financial news, read Water Cooler Finance: Shocking Court Rulings, Sinking Markets.)

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