By Ken Kmet, Condo Voice, Clearwater, FL

The level of lender foreclosures has increased in recent months, and that's created an economic stimulus to the housing industry, in traditional and non-traditional methods in the pre-sale and pre-rental market. This stimulus may not be apparent to the general public, because most of these activities involve services that are not sale-related. Let me break down the basics and provide an overview for you.

The majority of banks have sold or given their mortgages to either Fannie Mae (FM1) or Freddie Mac (FM2), the U.S. government. You may not know who owns your mortgage. To check to see if Fannie Mae owns your mortgage, click here. To check to see if Freddie Mac owns your mortgage, click here.

Based on my observations, FM1 and FM2 have taken inventory of their properties and begun foreclosing on those that have the least amount of losses first. It doesn't matter if the property is worth $20,000 or a million. The degree of foreclosure loss determines the order by which they foreclose or resume and finish previously started foreclosure processes. Another factor is the age of the previous foreclosure process.

Realtors are now being hired by FM1 and FM2 to list these properties for sale and rent. But before they can do this, a lot has to happen. FM1 and FM2 hire “scouts,” people who visit inventory properties to observe them from a distance, and to establish the “state” of the property for the lender. Is it abandoned, is it maintained, or is it occupied? If it looks abandoned, a sticker is placed on the front door, advising anyone who can offer information about the property to contact a provided phone number. I spoke to one scout who told me he visits an average of 50 properties each day. This indicates that a significant change has happened in the industry. Banks would not pay these expenses, which adds even more to their potential losses, to evaluate the state of their inventories, but the U.S. government does.

The scout files his report, and if there is no response within a short time, FM1 and FM2 hire a “preservation” service. Depending on the state of the property, if abandoned, the security department of the preservation service changes the locks and otherwise secures the property. There is some lawful question as to whether a lender can change locks on a property they technically do not own the title to. This is a case of it is easier to ask for forgiveness than get permission. And, if no one else cares about the property, it is better for the communities involved to have secured vacant property than non-secured, where homeless people and vandals can live in and most often destroy. I have seen examples of unsecured, abandoned homes where the conditions were unbelievable.

FM1 and FM2 are creating and stimulating the traditional and non-traditional real estate market, pre-sale, pre-rental, and after market. One wonders what this will do to property values as these properties flood the market. With borrowing rates low, and lenders (banks) being regulated with stiffer credit requirements and larger down payments, it is up to cash buyers to scoop up these properties while they can for cheap. But if there are not enough buyers, I see an incentive program coming in the near future from FM1 and FM2 to enable the purchase of these FM1- and FM2-owned properties by non-cash buyers who need assistance borrowing the money to do so.

One important note. It is a prime directive of any person or company hired by FM1 and FM2 to NOT disclose any information, including phone numbers, names, or addresses whereby FM1 and FM2 can be contacted by the public or the community association. All of my information is from the services named herein, as well as attorneys, realtors, contractors, and other national and local governmental departments related to and affected by this process.