Posts (RSS)Incentives to Contain Growth of Forclosure Listings
The Federal Home Loan Mortgage Corp. or Freddie Mac, one of the government-controlled home mortgage financial institutions, has added new incentives for potential buyers of properties on forclosure listings.
According to Freddie Mac, it would entice potential homebuyers by paying for certain closing costs and providing two-year warranties on properties purchased from its forclosure listings. Data showed that Freddie Mac?s inventory of foreclosure properties jumped consistently since 2007 as the economic downturn worsen and the housing market collapsed.
According to industry experts, the increasing volume of repo properties has weighed heavily on Freddie Mac, its sister company, Federal National Mortgage Association and other financial institutions. These institutions are finding it costly to maintain homes on their forclosure listings, not to mention the difficulty of unloading these distressed properties.
Industry experts often blamed unsold homes on inventories for the lingering housing market crisis due to low property prices. They said that potential buyers prefer to hold off making any purchasing because they want to see the housing market stabilize first before making any move.
As of March 31, Freddie Mac had nearly 29,145 on its home inventory, twice the number compared with figures in 2007.
The costs of maintaining these foreclosure homes took a toll on Freddie Mac?s finances which forced it to avail of $51.7 billion in federal support.
Brad German of Freddie Mac said that the government-sponsored company hopes that the initiative would lower its real estate inventory and subsequently reduced foreclosure-related losses. He said that properties with warranties would be able to fetch higher prices.
Under the new program, Freddie Mac will pay as much as 3.5 percent of the total sales price in the closing costs of a property. The initiative applies to properties that are owner occupied and are on the market for $25,000.
Industry experts are hoping that Freddie Mac?s initiative would be successful in curtailing the foreclosure rates which even grew to a record level of 1,905,723 for the first half of this year. The number of foreclosure filings represented a 9 percent increase from last year?s six months and 15 percent higher from the preceding month.
In June, the number of foreclosure filings jumped to 336,173 which helped the second quarter foreclosures sale go over the top.
The Freddie Mac initiative to contain the number of properties on forclosure listings will run until October 30, 2009.