FANNIE MAE HOMEPATH APPLIANCE INCENTIVE

Fannie Mae recently announced a sales incentive to encourage the sale of their REO properties. Local Michigan Bank Flagstar Bank issues the following guidelines for how the program will work.

This new incentive would apply to properties with purchase agreements signed on or after January28, 2010, and are closed and funded on or before April 30, 2010. During the negotiation of the purchase, Fannie Mae is offering buyers an incentive of up to 3.5% of the final sales price to be used towards the purchase of new Whirlpool® appliances. This appliance incentive is considered as part of the purchase price and will not be considered a seller concession. Here’s how the program works:

• Borrowers may negotiate an appliance credit up to 3.5% of the final sales price towards the purchase of new appliances. Fannie Mae will deliver the appliance directly to the new home. Since the appliance credit is considered part of the purchase price, this credit will not be reflected on the HUD 1 settlement statement.

• In addition to the appliance credit, the borrower may still negotiate up to 6% of the final sales price to be used towards seller contributions for the payment of closing costs and prepaids, not to exceed the actual amount as outlined in the current product description. Example: buyer could get the 3.5% appliance credit AND up to 6% in closing costs. In no case, however, can the closing cost credit exceed 6%, even if they don't use the whole 3.5% for appliances.

How does the lender know what option has been selected by the borrower?

Section 38 of the Real Estate Addendum will note what amount is being contributed towards closing costs and/or pre-paid and what amount is being credited for appliances. If the borrowers change how they wish to utilize the incentive prior to closing, a new Real Estate Addendum may be required. If the language in the purchase agreement includes “up to” or “not to exceed” for either closing costs or appliances, and the actual amount is less than the amount stated in the agreement and meets program guidelines, an amendment is not necessary. However, if the funds were previously divided between appliances and closing costs and change to all appliances or to all closing costs (or vice
versa), an amendment would be required. If a new amendment is required, it must be submitted for underwriting approval prior to closing.

Product Eligibility:
• Fannie Mae Homepath (Doc. #5349).
• Fannie Mae Homepath Renovation (Doc. #5721).

Property Eligibility:
• Primary Residence.
• Second home.-

Ineligible:
• Investment property.
• Conventional financing

So, you can buy a foreclosed house in which the previous owners (or perhaps vandals) have stripped out all of the appliances and now you can replace them with brand new appliances at Fannie Mae’s expense. Sweet! That probably will help move some of the stripped hulks that are sitting out there on the market.
Now, if we just get them to replace the cabinets, stolen copper pipes and toilets and sinks, we’d have a great program to deal with what we’re seeing out in the market. I suppose that there should be a program that evaluates whether a house is really worth saving and opts to tear it down if it isn’t worth cost and effort to rehab it.