Who really loses on a foreclosure – the bank? Think Again!

Bank Owned Foreclosure – A Play on Words?  

It is very common to associate a foreclosure with a bank, and this idea is reinforced when we see advertisements for “bank owned” properties.  Mistakenly, we also believe banks are taking the biggest financial hit when a house is sold as a foreclosure.  However, the fact is that in many cases a foreclosure is not owned by a bank.  If not the bank, then who owns these distressed properties and takes the financial  loss?

Understanding Fannie Mae and Freddie Mac

Fannie Mae (Federal National Mortgage Association) was created in 1938 during the Great Depression by Franklin D. Roosevelt, set up as a government-sponsored enterprise(GSE), and later converted into a publicly traded company in 1968.  Freddie Mac (Federal Home Loan Mortgage Corp.)  was founded in 1970 so Fannie Mae wouldn’t have a monopoly on government-backed mortgages. Their collective purpose is to buy mortgages from savings and loans, banks and lenders to provide cash for more mortgages.  The mortgages purchased by Fannie Mae and Freddie Mac are packaged into mortgage back securities(MBS) through a process called securitization. This process transforms realtively illiquid loans into highly liquid securities.  Therefore, the bank or lender who originates your loan or that services the loan by collecting monthly payment is probably not the entity that owns the note.

While relatively unknown to the general public, the significance of Fannie Mae and Freddie Mac to the mortgage market cannot be underestimated.  Combined they hold approximately $5 trillion of  mortgages, about half of the nation’s home loans. Losses to Fannie Mae and Freddie Mac are expected to approach $400 billion before the foreclosure crisis ends.  The graph to the right from The Cromford Report shows the percentage of distressed sales by city, many of which were owned by Fannie Mae and Freddie Mac.

Who really pays for foreclosures?

On September 7, 2008,  Fannie Mae and Freddie Mac were placed into conservatorship.  The federal government now explicitly guarantees debt issued by Fannie Mae and Freddie Mac.

In a Jan. 2011 article from the Arizona Republic, Anthony Sanders, a former professor of real estate and finance at ASU stated, “Fannie and Freddie losses are passed onto the taxpayers.”

If you want to know if your loan is owned by Fannie Mae or Freddie Mac, click here.  I found out that my loan is owned by Freddie Mac, not the company I mail a check to every month.

The next time you are driving around and see a  HomePath or HomeSteps foreclosure rider on a Phoenix real estate sign, you can be assured that it is a Fannie Mae or Freddie Mac foreclosure, not a bank owned property. Additionally, it is not any bank that is taking the loss but the US government,  and ultimately you and I.

Related Posts:

2012 Real Estate Market Trend

Distressed Property Posts

In search of happily ever after with a Phoenix short sale offer

 Phoenix Waterfront Foreclosures for Sale in Gilbert and Chandler

$245,000 :: 201 S 95TH Street, Chandler AZ, 85224

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4 beds, 2 baths
Home size: 1,570 sq ft
Lot Size: 7,840 sq ft
Added: 08/12/18, Last Updated: 08/16/18
Property Type: Single Family
MLS Number: 5806092
Community: Green Valley Estates Unit 2 Lo
Tract: Green Valley Estates Unit 2 Lo
The price of this listing was last reduced on 8/16/2018 by 4%
Status: Active


CENTRALLY LOCATED HOME FEATURES 4 BEDROOMS 2 BATHS, LIVING ROOM, FAMILY ROOM, TILE FLOORING THROUGHTOUT AND POOL.NO HOA.BREAKFAST BAR HOUSE NEEDS A LITTLE TLC AND IS PRICED ACCORDINGLY.OCCUPANTS ARE IN THE PROCESS OF MOVING SO PLEASE EXCUSE THE BOXES.CLOSE TO CHANDLER MALL.

Listed with West USA Realty


Brought to you by Gordon Baker, Remax Alliance Group. Call me today at 480-326-8571, or visit my website at www.myhomeinaz.com/!


$279,900 :: 2705 N HARTFORD Street, Chandler AZ, 85225

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4 beds, 2 baths
Home size: 1,805 sq ft
Lot Size: 7,840 sq ft
Added: 08/08/18, Last Updated: 08/16/18
Property Type: Single Family
MLS Number: 5803900
Community: PROJECT 12 ASSOCIATES LOT 1-17
Tract: PROJECT 12 ASSOCIATES LOT 1-17
The price of this listing was last reduced on 8/16/2018 by 2%
Status: Active


LOCATION! LOCATION! LOCATION! NO HOA! This gorgeous 4 bedroom, 2 bath home won't last long and is priced $13,000 BELOW appraisal!! NEWLY REMODELED KITCHEN AND BATHROOMS! Stainless Steel Appliances! ROOF WAS REPLACED 7 YEARS AGO! WATER HEATER IS ONLY 2 YEARS OLD! NEUTRAL COLORS and Laminate wood flooring throughout. Spacious Master bedroom suite with walk-in Closet. Master Bathroom has double sink vanity with tub/shower. Backyard has a Large covered patio and lap pool, the perfect spot to relax at after a hot and stressful day!

Listed with Revelation Real Estate


Brought to you by Gordon Baker, Remax Alliance Group. Call me today at 480-326-8571, or visit my website at www.myhomeinaz.com/!


$414,900 :: 2361 S GLEN Drive, Chandler AZ, 85286

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5 beds, 3 baths
Home size: 3,430 sq ft
Lot Size: 12,196 sq ft
Added: 12/02/17, Last Updated: 08/15/18
Property Type: Single Family
MLS Number: 5694440
Community: EAGLE GLEN 1
Tract: EAGLE GLEN 1
The price of this listing was last reduced on 8/15/2018 by 3%
Status: Active


Huge price reduction!!! Ready to sell! Beautiful home with new carpet, fresh paint, new Stainless Steel appliances ready for a new owner. Several living areas for lounging or entertaining guests. Large master bedroom with his-and-her closets. Secluded office area or study area for the kids. Backs to the San Tan Vista Trail.

Listed with Realty ONE Group


Brought to you by Gordon Baker, Remax Alliance Group. Call me today at 480-326-8571, or visit my website at www.myhomeinaz.com/!


$404,900 :: , Gilbert AZ, 85298

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0 beds, 0 bath
Home size: 2,140 sq ft
Lot Size: 85,377 sq ft
Added: 06/01/18, Last Updated: 08/10/18
Property Type: Single Family
MLS Number: 5774271
Community: Metes and Bounds
Tract: Metes and Bounds
The price of this listing was last reduced on 8/10/2018 by 14%
Status: Active


Great opportunity for custom home on nearly 2 acres in large lot subdivision with no neighbors behind (backs to canal). Lots of potential with this REO/Bank Owned Property. Property sold as occupied. DO NOT DISTURB OR CONTACT OCCUPANT. Bedroom/bathroom count is unknown, Seller and Listing Broker have not viewed interior of property. This property is now under auction terms. This property is subject to a 5% buyer's premium pursuant to the Auction Terms & Conditions (minimums may apply). All auction assets will be sold subject to seller approval.

Listed with LRA Real Estate Group, LLC


Brought to you by Gordon Baker, Remax Alliance Group. Call me today at 480-326-8571, or visit my website at www.myhomeinaz.com/!


$433,000 :: 95 E MARY Lane, Gilbert AZ, 85295

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5 beds, 3 baths
Home size: 3,267 sq ft
Lot Size: 10,018 sq ft
Added: 06/30/18, Last Updated: 06/30/18
Property Type: Single Family
MLS Number: 5787773
Community: ALLEN RANCH PARCELS 1 2 3 &amp
Tract: ALLEN RANCH PARCELS 1 2 3 &amp
Status: Active


Beautiful 5 bedroom sanctuary with 3 full bathrooms located in Gilbert's desirable Allen Ranch. Low HOA payments and so many greenbelts and parks that this looks like a golf community on the map. Your huge kitchen has vaulted ceilings on the same level as the formal dining/sitting area and overlooks the expansive family room and the pool. There are 3 bedrooms upstairs and 2 downstairs. The master bedroom is enormous with enough room for a seating area or exercise equipment. The beautiful backyard has fenced play pool separate from the large covered patio, grassy play area and RV parking. Your new home is located in an outstanding school district, one of the safest cities in Arizona and only 1 mile from the 202, and TONS of great restaurants, shopping and services.

Listed with West USA Realty


Brought to you by Gordon Baker, Remax Alliance Group. Call me today at 480-326-8571, or visit my website at www.myhomeinaz.com/!


Additional information about short sales and bank owned property can be found at Phoenix Waterfront Distressed Property

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