A crowded room at the 5 Star Conference this week erupted as Gabriele Harrison announced that Fannie Mae will be using asset management companies to handle their companies short sale requests in the future. Fannie Mae, the single biggest player in the mortgage market, will be informing clients that they will need to work with asset management companies when “short selling” their property.

An asset management company acts as a middle man between the banks that own the mortgage and the client that is trying to short sale the property. Asset management companies are already big players in the Foreclosure market, but up until now have not worked with short sale properties. The change that Fannie Mae and Freddie Mac are making should have some positive effects. Because most major banks use them for their foreclosed on properties, making the shift to Short Sale homes should be fairly straightforward. Using one company for all short sales will also streamline the process and speed up the time it takes for a client to short sale their house.

However, the new process is not great news for everyone. Since the housing collapse in late 2006 real estate agents have struggled to stay afloat, many agents have turned to short sales and working with distressed properties to help them stay afloat during the down market. When Fannie and Freddie start working exclusively with the asset management companies they will essentially be cutting out these agents. Fannie and Freddie currently own roughly half of the mortgages in America, if other big banks follow the lead small real estate agents will be all but cut out of the picture.

Details on the short sale process are still to come. We have put in calls to Mrs. Harrison (Fannie Mae) and Mrs. Beckles (Freddie Mac) however they were both unavailable for comment. We will keep you up to date on all the new developments as they come. We are still doing research but thought this information was worth sharing even in its primitive state.

The construction of an LDS Temple, considered the most sacred place on earth to the LDS community, has a history of dramatically increasing the value of homes in the surrounding area.  The newest Temple in the U.S. was opened in Idaho last August.  After the announcement of the temple property values immediately surrounding the temple doubled overnight.  Developers call increase in property value the “Temple Effect”.   Mormon Temples are relatively rare, and because they are considered sacred, many LDS members like to live in the shadows of these buildings.

If the Temple is built with the 180 foot steeple intact it will become Gilbert’s tallest standing building.   The building would exceed current city limits on the heights of buildings, and will have to go before the Gilbert Town council before it can begin construction.  It is unlikely however that the building will encounter much resistance when considering the positive effects on the community and town.   A key committee gave the project a green light earlier this week.  Once the town hall votes to approve the construction the church plans to begin construction within a year.

So is the Shadow Inventory buzz true? And wouldn’t it be in the best interest of the banks to sell the homes quickly and make their money faster? The short answer, No. While conventional wisdom would say the quicker the banks get their money the better, in the case of foreclosed homes the opposite seems to be true for two reasons.

1. Stopping the Bleeding – This is the obvious one, the real estate market has been in a free fall for quite a while now, if the banks dumped all the distressed homes onto the market right now it would devastate an already battered real estate market.  Reducing the inventory of distressed properties will help slow the downfall, and help stabilize the sector.   This helps make the banks remaining inventory more lucrative.
2. Cooking the books – This is the not so obvious one, the banks have a massive amount of homes being returned to them daily.  When the homes are returned to them they are on the companies books for the price of the loan.  However when the homes are listed and sold the bank must then change the books to reflect the accurate value of the home.  If big banks were to show their true worth, the companies equities and their stock prices would plummet.

Recent studies have compared the amount of foreclosed homes to the amount of listings from the banks.  The result was that only 30 percent of the foreclosures were making it to the market.  The remainder of these homes is what is known as the “Shadow Inventory”.

The revelations of this Shadow Inventory bring up another scary thought.  Is the bottom that we have been experiencing in the market real or is it a false bottom.  Will the bank eventually have to flood the market? Or will their efforts work and stabilize the market indefinitely?

Overall, May was an improving month for Arizona home sales.  Comparatively,  from those 9,290 homes sold – there were 3,653 more than the 5,637 homes sales that were recorded just one year ago in May 2008.  Impressive!

Comparing April 2009 to  May 2009, single family homes sold were both equal to 89%  of the market sold; townhouses were still responsible for 5%, Apartment style/flats were at 3%, Patio homes at 1% and Manufactured/Mobile Housing, Gemini/Twin Homes, Lofts and Modular / Pre-Fab homes were each at less than 1% of home sales.  

In May, there were 8,303 Single Family Homes sales, compared to April’s 7,663

(2nd column indicates patio home sales at less than 1% for both April & May; Figures provided by Fletcher Wilcox, Grand Canyon Title Agency # 602-648-1230 )

Troy Reeves and The Reeves Team are real estate industry innovators with over a decade of experience and hundreds of satisfied clients. Troy Reeves has created industry firsts, like:

“One Hour Return Call or Dinner For Two Is On Us”

“The 90 day Sale program”

“If you are not happy with the home you purchase with us, we will sell it for you FREE”

Troy Reeves was also one of the first REALTORS® in Arizona to create a “team” concept in the real estate market.

The following Terms & Conditions Apply:

• One or both spouses lose* their job over the next 365 days.  (person whom loses job must be primary mortgagee).
• Person or persons must purchase home with RE/MAX & The Reeves Team in 2009 and Troy Reeves & Team must receive 3% co-broke upon purchase of that home.
• If new home owner, at any time replaces or starts new job within 120 days of losing it, mortgage relief package (MRP) does not apply.

* Lose means laid off  (does not mean fired or quit)

One of the primary objectives of the plan is to provide an easier way for homeowners to refinance their loans if they have a Fannie Mae or Freddie Mac loan. To qualify for this refinance program your current first loan on your home cannot exceed 105% of the current market value. Looking at the local Mesa housing market that program will provide little help as most home buyers who purchased their homes between 2004 and 2007 are the ones who need the most help and most of them will owe well over the 105%. If you are current on your payments and you do owe less than 105% of your homes value there may be a good chance to refinance your loan in the current months to a lower interest rate.

If you are currently at a risk of foreclosure you probably will not qualify for the above program and may be wondering what is in the plan to help you and your situation? The government will be providing mortgage lenders with “financial incentives” to modify existing first mortgages. While there will be incentives, there will not be any mandatory obligations for the lenders to work with the homeowners so you will need to check with your lender about your situation. Banks will be smart to work with homeowners as it is in their best interest to keep you in your home, keeping a payment coming in and keeping your home off the foreclosure market which will help home values recover more quickly. But there are no guarantees.

To qualify for a payment reduction you will need to live in the home as your primary residency, your mortgage payment must be greater than 31% of your gross monthly income and your loan must not exceed current Fannie Mae and Freddie Mac loan limits. If you owe more than your home is worth and are facing foreclosure it will be up the lender if they want to work with you in restructuring your loan or not.

For even more information check out the White House Blog on this subject and the Presidents speech in which he will be delivering today. As always, when more information or details become available we will provide you with details on this space.