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Stabilizing Communities Through Responsible REO Management

SVP Chris BowdenCommunity stabilization is a critical component of our work to support the nation’s housing recovery. Stable communities foster steady home values and safer neighborhoods, which are important contributing factors to the growth and prosperity of local economies and their residents.

At Freddie Mac, we help to stabilize communities in a number of ways, including our foreclosure prevention activities, our work with national and local nonprofits, and by practicing responsible REO management and disposition. Our REO strategies play a key role in stabilizing communities and neighborhoods by encouraging first-time homebuyers and owner-occupants to purchase REO properties – homes that we have maintained to offer quality housing opportunities for America’s families. 

Our first priority is always to look for ways to help borrowers avoid foreclosure. When we have exhausted every option and foreclosure becomes a reality, Freddie Mac takes ownership of the homes and they are managed by our HomeSteps real estate sales unit. In today's market, our inventory of homes is growing significantly – nearly tripling over the last 24 months to more than 62,000. Not surprisingly, this has had a significant impact on home prices and communities.

Selling homes to owner-occupants - buyers who intend to live in the home as opposed to renting it out - plays a significant role in revitalizing and strengthening communities. Currently, more than two-thirds of our REO sales are to owner-occupants. Most of our marketing and sales strategies are geared toward attracting owner-occupants, and include incentives for both the real estate agents and prospective homebuyers. For example, our SmartBuy sales promotion offers owner-occupant buyers a two-year home warranty and closing cost assistance. In today's economy, home warranty protection and closing cost assistance are particularly valuable to first-time homeowners to help with down payments, transaction fees, moving costs, and home maintenance.

While most of our homes are sold through the traditional listing broker channel, we have begun to work with our nonprofit partners to help more first-time homebuyers and owner-occupants purchase Freddie Mac homes. In April, we worked with the federal Neighborhood Stabilization Program (NSP) to auction hundreds of Freddie Mac homes directly to owner-occupant homebuyers. More than 200 families in Las Vegas and California's Riverside/San Bernardino counties found a place to call home that day. We hosted our second NSP direct-to-homebuyer auction in Phoenix in early August, where an additional 72 buyers won bids for homes. And in some designated zip codes across the country we offer our REO homes for sale to prospective owner-occupant buyers via a national nonprofit before they are listed for sale on a multiple-listing service (MLS). 

Another critical part of our efforts to stabilize communities is practicing what we call our "Good Neighbor" property preservation policies. This practice mandates that within three business days of a confirmed vacancy, each home is secured, preserved, and cleaned. We continue to monitor and look after the home, and ensure that the landscaping is maintained. This not only creates better "curb appeal" for our homes from a marketing perspective, but it also significantly reduces complaints from neighbors and citations from local municipalities. Moreover, the enforcement of this policy helps to keep community property values up and enables us to sell our homes at better prices within acceptable timelines. To further this effort, we recently introduced door hangers for the listing brokers to put on neighboring properties. These contain contact information for interested homebuyers and for those in the community who may have a concern about one of our REO homes.

Finally, at a time when we want to help stabilize communities and the market, it's critical to have policies that help families remain in their homes after foreclosure. Approximately 50 percent of the homes that Freddie Mac acquires have occupants – either owners or tenants. In March 2009, we introduced the Freddie Mac Rental Initiative to offer qualified former owner-occupants and tenants month-to-month leases for homes where they live that are now owned by Freddie Mac. It benefits families by providing them with more time to determine their options, and helps to stabilize communities by keeping homes occupied thereby reducing vandalism and maintaining the good condition of properties. In addition, we also honor all existing lease terms of the homes we acquire through the foreclosure process. 

At Freddie Mac, we understand that stable communities and neighborhoods are fundamental to the prosperity of homeowners and local economies. We are committed to continuing to play a leading role in helping to establish and implement best practices and standards in REO management and disposition that foster steady home values and safer neighborhoods. 


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