In an effort to support neighborhood stabilization and provide owner occupants and public entities an advantage in purchasing Fannie Mae -owned foreclosed properties, the company has announced the launch of its First Look Initiative.

Through Fannie Mae’s First Look, only offers from owner occupants and buyers using public funds will be considered during the first 15 days a property is on the market, and offers from investors will only be considered after the first 15 days have passed.

“First Look provides owner occupants and public entities that are committed to the community an early opportunity to purchase one of Fannie Mae’s Real Estate Owned properties,” said Terry Edwards, EVP for credit portfolio management at Fannie Mae. “As a result, we believe First Look will help us make progress toward stabilizing neighborhoods and building stronger communities in this difficult market.”

The First Look Initiative was piloted in August and is receiving positive initial responses in its spread across the nation.

In Arizona, Neighborhood Stabilization Program (NSP) funds are being used by nonprofit members of the Local Initiatives Support Corporation’s (LISC) sustainable home ownership coalition is helping working families find and rehabilitate foreclosed homes through counseling and qualifying assistance. In one example, a young couple with a child participated in home buyer education classes and individual home buyer counseling, and as a result of NSP funds, the family received more than $20,000 in down payment assistance and $5,000 towards closing costs to purchase their home from Fannie Mae.

In Pasco County, Florida, the Paso County community development division has partnered with local nonprofits and uses NSP funds to acquire and repair foreclosed properties. After repair, the county offers homebuyer assistance for low to moderate-income buyers. This joint effort has allowed Pasco County to purchase 10 properties from Fannie Mae in the past six months.

George Romagnoli, community development manager for Pasco County’s community development division, said “Fannie Mae’s program allows our nonprofit partners the opportunity to get a slight leg up in obtaining properties for the Neighborhood Stabilization Program.”

By acquiring and rehabilitating homes for resale to home buyers, the city of St. Paul’s housing and redevelopment authority in Minnesota has been stabilizing neighborhoods and improving the quality of life for residents. Additionally, the authority has acquired and demolished structures where repairs are not financially feasible, providing the opportunity for future development in the area. The housing and redevelopment authority has closed on five properties in the past four months and has 24 more offers in the process.

“Fannie Mae’s First Look initiative has allowed us to access properties that otherwise would have been lost to us and very possibly used in a way that would continue to have negative effects in the communities,” said Sheri Pemberton-Hoiby, senior project manager with the city of St. Paul. “Fannie Mae’s First Look process gives us the time and easy access needed to gain control of the properties and allows us to influence the future of our neighborhoods. Plus, we have the ability to work directly with Fannie Mae representatives if issues arise.”

In addition to First Look, buyers using NSP funds from the U.S. Department of Housing and Urban Development’s (HUD) Community Development Block Grant (CDBG) program, HOME Investment Partnerships Program funds from HUD, local housing trust funds, or charitable foundation funds may also qualify for additional benefits. Fannie Mae will waive the earnest money and deposit requirement for public entities using public funds to purchase a Fannie Mae-owned property, and upon receipt of an acceptable offer, buyers will have the ability to renegotiate their offer after obtaining an NSP-required appraisal. Buyers purchasing these properties will also receive up to 45 days to close, 15 more days than is usually permitted.

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In an effort to help borrowers with Countrywide subprime and option-ARM mortgages avoid foreclosure, Bank of Americacreated its National Homeownership Retention Program (NHRP), providing mortgage relief to 100,000 eligible homeowners in just 10 months. In the third quarter alone, more than 31,000 customers received assistant through the NHRP, according to the bank’s quarterly progress report.

“The NHRP is one of the proprietary foreclosure prevention programs we use in addition to the federal government-sponsored Home Affordable Modification Program (HAMP),” said Jack Schakett, credit loss mitigation strategies executive for Bank of America home loans. “Through this and other programs, Bank of America has provided relief through completed and trial modifications to more than 600,000 customers since the beginning of last year.”

Bank of America reached an agreement regarding the NHRP with state attorneys general in October 2008, three

months after acquiring Countrywide Financial Corporation. The goal of the program is to provide loan modifications to Countrywide customers with loan products that Bank of America discontinued upon acquiring the company. Nearly 400,000 homeowners across the country were affected by these discontinuations and have been identified as potentially eligible for the NHRP.

From initiation of the NHRP on December 1, 2008 to September 30, 2009, mortgage modification offers were made to 143,271 homeowners, and 80,875 customers received mortgage relief, resulting in potential aggregate principal and interest savings of $1.6 billion. The NHRP progress reports also noted that during this same time, more than 19,500 other NHRP-eligible borrowers entered trial modifications under the federal government’s HAMP. An additional 35,000 NHRP-eligible homeowners entered the HAMP trial period in the six weeks following the close of the reporting period.

As part of the NHRP agreement, relocation assistance and foreclosure relief programs are provided in 41 states and the District of Columbia. Under the terms of the agreement, Bank of America had provided more than $40 million in relocation assistance to customers and tenants in eligible properties that have gone into foreclosure, according to the third-quarter progress report. Additionally, the bank has allocated up to $150 million in funding to participating states, in hopes of providing foreclosure prevention programs and financial relief for eligible borrowers who went into default shortly after taking out a qualifying loan. Borrowers who are eligible for a relief payment have been sent notification letters, and checks will be issued during the first quarter of 2010.

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Nearly a quarter of homeowners who still owe on their mortgage are underwater or upside down, meaning they owe more on their home than it is now worth, according to new research published this week by First American CoreLogic.

The real estate data provider says nearly 10.7 million, or 23 percent, of all residential properties with mortgages were in negative equity at the end of the third quarter. An additional 2.3 million mortgages were approaching negative equity, meaning they had less than five percent equity.

Perhaps even more disquieting is that the numbers would go even higher if First American CoreLogic used the same methodology it’s previously used to calculate negative equity. In its latest report, the company said it factored in two pieces of information not reflected in earlier studies, in order to provide a “more precise view of underwater borrowers”: how much of the loan principal has been paid down and how much of a home equity line of credit (HELOC) is being used.

First American CoreLogic explained that as a point of comparison, using the previous methodology, which did not account for amortization or HELOC utilization, the Q3 negative equity rate would have been 33.8 percent.

The distribution of negative equity is heavily concentrated in five states, where housing prices have nosedived.

A staggering 65 percent of mortgages in Nevada are upside down. Arizona and Florida were both close to the half-mark with 48 percent and 45 percent, respectively. In Michigan, where the auto industry’s troubles have taken their toll on every aspect of the economy, 37 percent of mortgages are in negative equity territory. And you certainly can’t leave out California, which took the No. 5 spot, with an underwater ratio of 35 percent.

To put the numbers into perspective, the average negative equity share for all the remaining states was just 14 percent.

According to First American CoreLogic, the rise in negative equity is closely tied to increases in pre-foreclosure activity. At one end of the spectrum, borrowers with equity tend to have very low default rates. At the other end, investors are much more likely to default on their mortgages once they cross into negativity. First American CoreLogic says the default rate for investors is typically two to three percent higher than owner-occupied homes with similar degrees of negative equity.

The company also noted in its study that the bulk of upside down borrowers share certain set of characteristics. They financed their properties between 2005 and 2008, with adjustable rate mortgages (ARMs), and they bought less expensive properties.

Mark Fleming, chief economist with First American CoreLogic, said, “Negative equity continues to be pervasive and to impact almost every segment of the housing market. The recent improvement in home prices this past spring and summer has slowed the increase in negative equity, but it will take a significant rebound in home prices, which we are not expecting, to offset the dampening effects of negative equity in the most depressed states.”

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