After the housing crash, the Federal National Mortgage Association, or Fannie Mae, set up the Homepath program, allowing people who planned to live in previously foreclosed homes an opportunity to buy them before investors.
But the I-Team has learned that the program doesn't always work to put owner-occupants in homes, since rules are sometimes hard to understand and not everyone is abiding by them.
“I had my heart set on it,” said Clearwater cigar store owner Leglio Sotolongo of his dream home.
The property, located in rural Pasco County, came with a barn and stables on five acres.
“I planned on living there the rest of my years,” Sotolongo said.
But first he had to buy it.
Since it was a Fannie Mae Homepath property, his agent didn't like his chances.
“The first thing she said was it's very difficult to buy these properties,” he said.
Homepath gives owner-occupants a first look period, which is 20 days when they can make offers before investors.
“You're getting a home that is at a little lower price typically,” said Tampa realtor Bill Zydlowski, who often represents buyers trying to acquire homes through Homepath.
Szydlowski says Homepath lets buyers make low down payments and makes low interest loans available to them, which often triggers bidding wars on hot properties.
Homepath properties are also move-in ready, unlike other foreclosure homes.
“They're more than likely gonna come back, in my experience, with a multiple offer situation,” said Zydlowski.
“We gave it our best shot. We bid over asking," said Sotolongo, who bid $6,400 over list price and agreed to follow Homepath's rules.
“I had to sign a paper stating that it would be my primary residence, that I would occupy the home in 60 days and that I wouldn't sell the property for a year,” Sotolongo said.
Martha Rose bid $800 more and got the property.
She was represented by Tropic Shores Realty, which also listed the home and reviewed all offers before submitting them to Fannie Mae.
“You just pray about it and the lord tells you how much to bid,” Rose said.
Rose has experience buying homes.
Property records in Pasco and Hernando counties show she owns four investment properties, in addition to her primary residence, where we found her about a week before she was supposed to occupy her new Homepath property.
“I am planning to move there. In fact I would like to move there in the next five months,” Rose said.
As part of her agreement to participate in Homepath, she had to agree to live in the home within 60 days or possibly face a $10,000 fine.
Rose also made a full cash offer.
“Cash talks, everything else walks,” said Rose.
Since 2009, of the Pasco County foreclosure homes sold during the first 20 days on the market, when Tropic Shores represented both the buyer and seller, 44 of 45 were full cash offers.
“First time homebuyers typically aren't offering cash. What you're seeing is, more than likely, the investors,” said Sydlowski.
Tropic Shores served as a dual agent for multiple investors.
One home sold twice in the same day, another was bought by an investor who had previously purchased five other foreclosure homes from Tropic Shores.
Tropic Shores sold others in the first 20 days to corporations and out-of-state buyers who never moved in.
“If it's being used just for investors, it's an unfair system,” said Sotolongo.
Tropic Shores owner Jim Tacy declined an on-camera interview, but said he would never knowingly sell to an investor during the owner-occupant period.
He added the many of the government-owned foreclosure properties are exempt from Homepath rules and that other loopholes sometimes allow investors to buy government foreclosures during the first twenty days.
Homepath also heavily relies on buyers to be honest on applications, since realtors don’t always know whether or when the buyer will actually move in.
Rose says she now plans to follow those rules.
“If somebody wants to bring a moving truck up here, I'll put some furniture on it and they can take it over there for me,” she said, claiming she didn’t remember reading that provision in the paperwork she signed to buy the home.
Tacy said there’s no indication Rose planned to use the home as an investment, since her other investment properties were purchased for significantly lower prices.
Sotolongo says the next home he makes an offer on will not be a government-owned foreclosure property.
The Federal Housing Finance Agency says that abuse of REO sales programs is rare, but in a report to Congress last year, the agency said authorities charged or convicted 11 people in connection with criminal schemes involving the federally owned foreclosure properties.
If you think you have issues as an owner occupant with buying government-owned foreclosure properties, the I-Team would like to hear from you.
Contact us at firstname.lastname@example.org.