Last month, I badgered Goldman Sachs about the unhelpful, self-defeating, and cruel attitude of its Litton subsidiary towards homeowners offering an everybody-wins way of staying in their homes. That story had a happy ending. So if the Vampire Squid can do the right thing in these situations, what are the chances that Fannie Mae might be able to follow suit? I’m not optimistic: so far Fannie’s flacks haven’t even managed to respond to multiple voicemails and emails. And Goldman can surely move a lot faster than Fannie can, when it puts its mind to it.
Once again, the story centers on a sale-and-leaseback proposal from American Homeowner Preservation, whom I wrote about in April. AHP’s principal, Jorge Newberry, explains what’s going on.
The homeowners here are Brad and Christina Brown, and the white knight is their neighbor Draga Sikanovski. Going via AHP, Sikanovski is willing to buy the Browns’ house in a short sale, at the market price, and then give the Browns an affordable five-year lease, along with a 5-year option to repurchase.
The Browns’ lender, One West Bank, was utterly useless. AHP offered to buy the home off them, but they lost the paperwork and then said that they needed the offer price raised to $115,000 to avoid a trustee sale on May 27. Sikanovski agreed to the higher price, and deposited the entire amount, in cash, into an escrow account, while the Los Angeles County Tax Assessor reduced the market value to $110,000.
And then, inexplicably, One West went ahead with the trustee sale anyway, which transferred title to Fannie Mae. Fannie Mae, working through local realtor Joe Mayol, did its standard thing, offering cash for keys: $3,000 if the Browns moved out within 15 days. AHP came straight back with a counteroffer: they would simply buy the house outright for $115,000 in cash, more than its appraised value. Newberry explains what happened then:
Mayol was friendly and indicated that he would like to help, but that the property was now controlled by Fannie Mae, whose REOs must go through the First Look program, whose stated intent is “to provide neighborhood stabilizing entities – owner occupants, public entities, non-profits, and similar organizations – a ‘first look’”. Thus, as Fannie Mae considers the AHP/Sikanovski offer an “investor” offer, the Browns would need to vacate the home and wait out a minimum 15-day waiting period before the AHP/Sikanovski offer could be presented.
In other words, AHP wants to buy the house to keep the present occupants in their home, but Fannie Mae is forcing the occupants out of the house before it will even consider the offer. You can see why Newberry is upset:
The AHP/Sikanovski offer would best achieve the “neighborhood stabilizing” goals of First Look and also net the highest return to Fannie Mae on this asset: the time and expense of cash-for-keys, preservation and marketing expenses would all be saved. Sadly, instead of allowing a neighbor helping neighbor solution to not only help stabilize this neighborhood, but also stabilize the Brown family, Fannie Mae is imposing their own solution which will displace the Brown family and result in yet another vacant bank-owned REO in Palmdale, a city already saturated with REOs begging for the buyers First Look is designed to attract.
Is there any way for Fannie Mae to embrace a bit of common sense here? It’s part of the government, so I’m not hopeful; they’re certainly not returning my calls. It’s increasingly looking as though Fannie Mae is one organization which makes even Goldman Sachs look good in comparison.