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

$319,950 :: 625 N ELM Street, Chandler AZ, 85226

Property Photo

Mls Icon

4 beds, 2.5 baths
Home size: 2,255 sq ft
Lot Size: 5,227 sq ft
Added: 02/08/19, Last Updated: 02/08/19
Property Type: Single Family
MLS Number: 5880792
Community: PINERIDGE
Tract: PINERIDGE
Status: Active


Features for this 4 bedroom, 2.5 bath Chandler home include formal living room with fireplace, downstairs family room, split level floor plan, vaulted ceilings, downstairs Master BR with walk-in closet, breakfast room, rear covered patio/balcony, 2 car garage and more! Take a look!!

Listed with A.Z. & Associates Real Estate 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/!


$479,900 :: 490 S EMERSON Street, Chandler AZ, 85225

Property Photo

Mls Icon

4 beds, 3.5 baths
Home size: 3,851 sq ft
Lot Size: 10,454 sq ft
Added: 11/02/18, Last Updated: 02/08/19
Property Type: Single Family
MLS Number: 5841713
Community: CAMPO VERDE
Tract: CAMPO VERDE
The price of this listing was last reduced on 2/8/2019 by 2%
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/!


$251,800 :: 6354 S FOREST Avenue, Gilbert AZ, 85298

Property Photo

Mls Icon

3 beds, 2.5 baths
Home size: 1,628 sq ft
Lot Size: 4,356 sq ft
Added: 01/11/19, Last Updated: 02/15/19
Property Type: Single Family
MLS Number: 5866261
Community: SEVILLE PARCELS 5 & 6
Tract: SEVILLE PARCELS 5 & 6
The price of this listing was last reduced on 2/15/2019 by 5%
Status: Active


Great home in master planned community of Seville. Property features 3 bedrooms, 2.5 baths, a largekitchen with breakfast bar that opens to separate living and dining areas with plenty of natural light. Don'tdelay!

Listed with Real Home Services & Solutions


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


$245,000 :: 108 S CHOLLA Street, Gilbert AZ, 85233

Property Photo

Mls Icon

3 beds, 2 baths
Home size: 1,274 sq ft
Lot Size: 7,405 sq ft
Added: 01/28/19, Last Updated: 02/15/19
Property Type: Single Family
MLS Number: 5874311
Community: OLD WEST ESTATES NO 1
Tract: OLD WEST ESTATES NO 1
The price of this listing was last reduced on 2/15/2019 by 2%
Status: Active


Welcome to 108 S Cholla St Gilbert Arizona 85233, this home offers you 3 bedrooms, 2 bath, NO HOA, newer kitchen with upgraded cabinets, black matching appliances and GRANITE COUNTER TOPS, tile in all the right places, RV Gate, great LOCATION in the heart of Gilbert, just minutes away from the downtown Gilbert Entertainment District. Close to the sought out Gilbert School's, shopping and much more.

Listed with The Daniel Montez Real Estate 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/!


$421,500 :: 3524 E DERRINGER Way, Gilbert AZ, 85297

Property Photo

Mls Icon

5 beds, 3 baths
Home size: 3,348 sq ft
Lot Size: 10,890 sq ft
Added: 01/18/19, Last Updated: 02/13/19
Property Type: Single Family
MLS Number: 5869789
Community: SAN TAN RANCH PARCEL 3
Tract: SAN TAN RANCH PARCEL 3
The price of this listing was last reduced on 2/13/2019 by 4%
Status: Active


Make your move now by investing in this pristine 3,348 sq. ft. 2 story situated within a cul-de-sac of Gilbert's exclusive San Tan Ranch! Conventional eat-in kitchen boasting smooth granite countertops, electric oven, spacious walk-in pantry, dishwasher, and disposal. Spacious dining area, family room and upstairs master bedroom. Main bathroom features include coveted seperate walk-in shower, large immaculate bathtub, dual sinks, and cabinetry. Covered private backyard patio with an enticing pool surrounded by low maintenance desert landscaping. 3 car garage with the advantage of built-in cabinetry, electric opener, and direct entry from within home.

Listed with WEICHERT, REALTORS - Peak Performance


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


$419,900 :: 1874 W SAN ANGELO Street, Gilbert AZ, 85233

Property Photo

Mls Icon

5 beds, 3 baths
Home size: 3,859 sq ft
Lot Size: 13,068 sq ft
Added: 01/14/19, Last Updated: 02/11/19
Property Type: Single Family
MLS Number: 5867913
Community: EL DORADO LAKES GOLF COMMUNITY TRACT B
Tract: EL DORADO LAKES GOLF COMMUNITY TRACT B
The price of this listing was last reduced on 2/11/2019 by 3%
Status: Active


Gorgeous home backing hole 16 at Kokopelli golf course! This one has a huge backyard, sparkling pool, and beautiful views from the master balcony! This is a perfect home for entertaining! Home also features ceiling fans, built ins, dual sinks in all three bathrooms, bay windows, fireplace, tons of TONS of natural light, kitchen island, built in garage storage, vaulted ceilings, huge master bathroom, and walk in closet, and true vanity! Please note we have observed cracks in the wall in the den, and a slab crack under the carpet in the den. We located and repaired an underground leak, which can be observed where there is new poured concrete. See Realtor Remarks for access information. Buyer to verify all facts, figures, measurements and HOA related fees. Property sold as-is.

Listed with Olson Gough


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


$375,000 :: 241 W BROOKS Street, Gilbert AZ, 85233

Property Photo

Mls Icon

3 beds, 2 baths
Home size: 2,243 sq ft
Lot Size: 6,969 sq ft
Added: 01/26/19, Last Updated: 02/06/19
Property Type: Single Family
MLS Number: 5873954
Community: RAVEN RANCH
Tract: RAVEN RANCH
The price of this listing was last reduced on 2/6/2019 by 4%
Status: Active


This beautiful single story home with pool a 3 car garage has it all! This home boasts 3 bedrooms plus a den that can be converted into a fourth bedroom. This home is an entertainers dream with built in speakers in formal living area, family room, master bedroom, office and back patio. The resort style backyard has a pool w/water feature, pavers, built-in gas grill and a built-in charcoal grill/smoker! Very private yard with north/south exposure. Side yard has a sidewalk leading from backyard to gate. 3 car garage with built in cabinets and an access door from garage to side yard. Laundry room has cabinetry and a sink.

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/!


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

2 Replies to “Who really loses on a foreclosure – the bank? Think Again!”

Leave a Reply

Your email address will not be published. Required fields are marked *