Massachusetts sued Fannie Mae and Freddie Mac in Superior Court this week for these entity’s failure to comply with Massachusetts foreclosure law. Last year, Massachusetts passed a new anti-foreclosure law that includes a “non-profit buyback provision.” This law prevents an owner of a foreclosed property from refusing to sell the property to a non-profit organization solely because the property will, in turn, be sold back to the previous owner. This part of the law is intended to support non-profit organization, such as Boston Community Capital, who are helping homeowners save their homes by purchasing these properties from foreclosing entities and selling then back to homeowners at the property’s market value.
Fannie Mae/Freddie Mac appear to be fighting this law because they are concerned that such buy-back programs encourage homeowners to default on their loans. I can understand this argument from a private lender’s standpoint, but not from public government-sponsored enterprises such as Fannie Mae/Freddie Mac, who have been supported with taxpayer dollars and government bailouts and have been rightfully blamed for their role in the ongoing foreclosure crisis. Moreover, with these buy-back programs, Fannie Mae/Freddie Mac are getting fair market value for their foreclosed properties; not a bad deal when you consider the high numbers of vacant, foreclosed properties around the country. Fannie Mae/Freddie Mac have a long way to go in rebuilding their credibility with the American public, and fighting Massachusetts’s common sense law is not going to work in their favor.