Fannie Mae and Freddie Mac are selling hundreds — perhaps thousands — of foreclosed properties in metro Detroit for far less than they appear to be worth, a practice that local leaders say is driving down property values and weakening neighborhoods.
In some instances, homes listed by the government-financed mortgage giants are being snapped up by private investors, then re-sold within days or weeks for far more money.
Local officials blame the federal government — which took control of Fannie and Freddie in 2008 at a cost to taxpayers of $141 billion and climbing — for doing little to stop the fire sales.
Meg Burns, chief of policy at the Federal Housing Finance Agency, which regulates Fannie and Freddie, acknowledged the two companies are eager to sell foreclosed homes as quickly as possible. However, she said the aim is to prevent vacant homes and neighborhood deterioration, not destroying property values.
A Free Press investigation, including an analysis of more than 700 real estate transactions in the past year, finds that Fannie and Freddie are selling foreclosed homes, on average, for a third less than the homes’ already deflated market value in some areas, and at less than half of market value in other neighborhoods.
Critics say the low list prices are part of the companies’ rush to get foreclosed homes off their books while U.S. taxpayers are still covering the mortgage giants’ losses, three years after the federal government bailout.
In February and March, 34 Fannie and Freddie properties in Southfield were sold by the mortgage giants for 55% of their market value, on average, property records show.
Fannie Mae spokesman Andrew Wilson said the company typically bases its listing price on an appraisal and the recommendation of a broker.
“Once a value has been established … our marketing efforts are primarily focused on finding buyers for our properties at a price that promotes neighborhood stabilization,” he said. “Our No. 1 goal is to sell to owner-occupants who will move into the neighborhood and help to stabilize the community.”
Wilson declined to answer other questions about Fannie’s practices or address the metro Detroit home sale data compiled by the Free Press.
Wayne State University law professor John Mogk, an expert in real estate and urban development, also called assessed values a valid benchmark and “a reasonable standard to use.”
In Michigan, the assessed value is supposed to be half the market value of a home. Independence Township appraiser Louise Braun used twice a home’s assessed value as her benchmark to compare Fannie and Freddie sales of foreclosed homes against the sale of other single-family homes in several Oakland County communities.