Government Agencies Becoming a Good Source of Cheap Real Estate
As a consequence of the recent recession and housing crisis, the US government has become one of the largest owners of real estate in the country. The month of May saw a record number of foreclosures, nearly 325,000, filed against homeowners; and over the last five years, more than 3 million homes have been seized from homeowners unable to keep up with mortgage payments.
A common misconception is that foreclosed properties all belong to the banks and lenders who financed the loans, but the government, through its role in guaranteeing loans and purchasing mortgage backed securities, also owns a vast array of commercial and residential real estate. The bulk of these properties have fallen into government hands as a result of the government's conservatorship over Fannie Mae and Freddie Mac, the mortgage giants that were put under government control to prevent their bankruptcy in 2008.
Freddie Mac, otherwise known as the Federal Home Loan Corporation, owned about 45,000 homes at the end of last year. The company estimated the total value of these properties at just over $5 billion. These properties were mostly obtained through public auctions in which the homes were used as collateral for Freddie-owned loans, or when homeowners simply forfeited the properties over to Freddie without going through a foreclosure. Now the company is offering huge discounts to unload its inventory of homes, posting the homes on real estate sites.
Fannie Mae, known as the Federal National Mortgage Association, owned more than 85,000 homes on January 1st, valued at an estimated $8.5 billion. The majority of Fannie's holdings are located in the states hit hardest by the housing crisis, with nearly 30 percent of them in the states of Nevada, California, Arizona, and Florida. Fannie is also aggressively trying to unload this inventory, having sold almost 125,000 homes in 2009. The two mortgage companies have even started their own websites, Homesteps.com (Freddie) and Homepath.com (Fannie), on which users can browse for properties in their area.