Fannie Mae and Freddie Mac will soon be selling repossessed homes back to their previous owners for less than what they’d owed on their mortgage when they defaulted.

The mortgage giants’ federal regulator this week ordered them to drop a requirement that homeowners who wanted to buy their home back from Fannie or Freddie repay the entire amount they’d owed on the mortgage. Instead, they’ll be treated just like any other REO buyers, and permitted to buy the home at fair market value.

So if you owed $500,000 on your mortgage when your home was repossessed, and Fannie or Freddie has put it back on the market for $300,000 because its value was wildly inflated during the boom, you could end up back in the same house with a much smaller mortgage — as long as you intend to use that home as your principal place of residence.

Like everyone who’s been through foreclosure, you’ll have to have waited a minimum of three years before you’ll be eligible to finance a home purchase using a loan eligible for purchase or guarantee by Fannie or Freddie. 

The policy change applies to all 121,000 homes in Fannie and Freddie’s inventory of single-family homes as of Nov. 25. 


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