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

$309,900 :: 373 E TREMAINE Drive, Chandler AZ, 85225

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4 beds, 3 baths
Home size: 1,323 sq ft
Lot Size: 41,382 sq ft
Added: 12/13/18, Last Updated: 12/13/18
Property Type: Single Family
MLS Number: 5857043
Community: TREMAINE PARK
Tract: TREMAINE PARK
Status: Active


4 bedroom/3 bath home in Tremaine Park. Conveniently located near US-60 and Loop 202. Home features include North/South exposure, large fenced yard with private pool, dual pane windows, RV gate, 3 baths, open kitchen and covered patio. No HOA and horse privileges with set-up! This remarkable property is available for immediate sale. The seller is very responsive and the property is a perfect opportunity for all buyer types.

Listed with American Allstar 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/!


$295,500 :: 691 N ALDER Drive, Chandler AZ, 85226

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3 beds, 2.5 baths
Home size: 2,185 sq ft
Lot Size: 8,712 sq ft
Added: 11/08/18, Last Updated: 12/11/18
Property Type: Single Family
MLS Number: 5844201
Community: PARK PROMENADE PARCEL 1 AMD
Tract: PARK PROMENADE PARCEL 1 AMD
The price of this listing was last reduced on 12/11/2018 by 6%
Status: Active


REDUCED FOR IMMEDIATE SALE! EXCELLENT BUYER OPPORTUNITY & CHANDLER LOCATION IN HIGH DEMAND ''PARK PROMENADE'' SUBDIVISION WITH LOW SEMI-ANNUAL HOA FEES. PREMIUM OVERSIZE LOT WITH POOL & SPA, BUILT-IN BBQ, & SEPARATE BACKYARD PLAY AREA! TERRIFIC UPSIDE & POTENTIAL AFTER NEW BUYER UPDATES & REMODELS. SUPER 2 STORY FLOOR PLAN FEATURES 3 BEDROOMS PLUS LOFT, 2.5 BATHS, INSIDE LAUNDRY RM, FORMAL LIVING & DINING, REAR EAT-IN-KITCHEN & FAMILY RM, MASTER SUITE, LOFT, & ALL BEDROOMS UPSTAIRS, ELECTRIC & GAS UTILITIES, SIDE DOUBLE GATE, GARAGE SERVICE DOOR, REAR COVERED PATIO, 2 CAR GARAGE, & MORE! SUBMIT ALL CASH ONLY OFFERS NOW FOR SELLER REVIEW & APPROVAL.

Listed with Realty Executives


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


$180,000 :: 2314 W BENTRUP Street, Chandler AZ, 85224

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2 beds, 1 bath
Home size: 909 sq ft
Lot Size: 6,098 sq ft
Added: 12/06/18, Last Updated: 12/06/18
Property Type: Single Family
MLS Number: 5854533
Community: KNOELL EAST UNIT 4 LOT 513-836
Tract: KNOELL EAST UNIT 4 LOT 513-836
Status: Active


Charming 2 bedroom 1 bath home featuring a spacious great room floor plan, kitchen with separate eating area, center island and most appliances, extended back patio. Great convenient location with easy access to the 101 freeway and all amenities. Buyer to verify any and all items that are of material issue.

Listed with Legion 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/!


$499,900 :: 490 S EMERSON Street, Chandler AZ, 85225

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4 beds, 3.5 baths
Home size: 3,851 sq ft
Lot Size: 10,454 sq ft
Added: 11/02/18, Last Updated: 12/01/18
Property Type: Single Family
MLS Number: 5841713
Community: CAMPO VERDE
Tract: CAMPO VERDE
The price of this listing was last reduced on 12/1/2018 by 4%
Status: Active


4 bedroom/3.5 bath home in Campo Verde on large corner lot across from community park. Property features include stone veneer, upgraded stair rail, granite counters, huge master suite with upstairs study, tile floors, upgraded cabinets, covered patio, gas fireplace with stone veneer, 3 car garage, stainless steel appliances and kitchen island. This remarkable property is available for immediate sale. The seller is very responsive and the property is a perfect opportunity for all buyer types.

Listed with American Allstar 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/!


$374,900 :: 3153 E ANDRE Avenue, Gilbert AZ, 85298

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5 beds, 4 baths
Home size: 3,304 sq ft
Lot Size: 7,840 sq ft
Added: 11/13/18, Last Updated: 12/12/18
Property Type: Single Family
MLS Number: 5846484
Community: COUNTRY SHADOWS
Tract: COUNTRY SHADOWS
The price of this listing was last reduced on 12/12/2018 by 1%
Status: Active


Gorgeous 5 bedroom home with 4 full baths and 2 master suites!! Huge great room and kitchen that is perfect for entertaining! This home also features a loft and an office. The kitchen boasts a large island, granite countertops and plenty of cabinets. The master ensuite features dual sinks, separate tub and shower, private toilet room and walk in closets as well as a private balcony with mountain views! All the secondary bedrooms feature large walk in closets as well. Neutral paint and flooring throughout. Don't miss your opportunity to own in the highly sought after County Shadows community!

Listed with The Offer Company


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


$322,900 :: 1159 E DEL RIO Street, Gilbert AZ, 85295

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4 beds, 2 baths
Home size: 1,945 sq ft
Lot Size: 7,840 sq ft
Added: 11/12/18, Last Updated: 12/10/18
Property Type: Single Family
MLS Number: 5845975
Community: SPRINGTREE 2
Tract: SPRINGTREE 2
The price of this listing was last reduced on 12/10/2018 by 0%
Status: Active


Excellent opportunity in highly sought after Gilbert location! This 4 bedroom, 2 bathroom home sits on an interior, North/South exposure lot on very quiet street. This Beazer home offers an open floor plan with separate living room and family room. Hard surface flooring throughout with carpet in the bedrooms. Large kitchen with eat-in area, kitchen island and breakfast bar - all brand new appliances. Plantation shutters throughout home. Master features a large ensuite with separate shower & tub - nicely upgraded tile in the shower. Large lot with grassy backyard and covered patio!

Listed with Keller Williams Integrity First


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


$384,800 :: 2041 E STEPHENS Road, Gilbert AZ, 85296

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5 beds, 3.5 baths
Home size: 3,994 sq ft
Lot Size: 12,632 sq ft
Added: 12/02/18, Last Updated: 12/02/18
Property Type: Single Family
MLS Number: 5853171
Community: PARKSIDE AT FINLEY FARMS UNIT
Tract: PARKSIDE AT FINLEY FARMS UNIT
Status: Active


AS / IS sale, seller does NOT provide SPDS or CLUE disclosures. BUYER TO VERIFY ALL INFO HEREIN.Do not make blind offers on the property.Buyers need to review and execute the attachment previous to making an offer as well. Property is in need of serious repairs.No repairs will be made at any time. No seller credits will be issued at any time. Highest & Best offer is due by 12.11.18.

Listed with Merit 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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