Freddie Mac Plans Huge Foreclosure Auction : Real estate: The unusual action is part of a major reorganization effort.
The Federal Home Loan Mortgage Corp., in its largest auction ever of foreclosed residential properties, this month will auction off 248 houses and condominiums in Southern California worth an estimated $30 million.
The congressionally chartered corporation--which normally hires real estate brokers to sell its foreclosed property--is holding the huge auction on July 25 and 26. It is the result of a major reorganization of the corporation, known as Freddie Mac, that will eliminate foreclosure operations in three of its five regional offices and consolidate them in Dallas and in its suburban Washington, D.C., headquarters.
The auction, which will be held at the Los Angeles Convention Center on the 25th and at the Westin South Coast Plaza on the following day, is the largest of residential property by any single entity in California, according to the auctioneer.
Freddie Mac hired Santa Monica-based Kennedy-Wilson Inc. to conduct the auction and is providing up to 95% financing on the properties, which are located in a seven-county area of Southern California extending from Bakersfield to San Diego.
“Many of these properties were just recently acquired by us,” said David E. Posley, regional manager of Freddie Mac’s real estate-owned division. “Like other financial institutions, Freddie Mac is experiencing an increase in” foreclosed properties.
Lenders, mortgage holders and even home builders have increasingly turned to auctions in the aftermath of a 2-year-old real estate slump that has depressed the value of everything from office buildings to single-family homes.
The Resolution Trust Corp., the federal agency cleaning up the savings and loan debacle, has sold more than $6.2 billion worth of its real estate loans, securities and other holdings through auctions in the last two years.
All of this has been a boon for Kennedy-Wilson and other auctioneers.
“Today we are selling more high-quality real estate than ever before,” said Bill McMorrow, chairman and chief executive of Kennedy-Wilson. “We are even auctioning properties where there is no financial distress at all.”
Although none of the 248 Freddie Mac properties are located in the most expensive Southern California enclaves, a number are located in solid middle-class communities, such as Canoga Park, Ventura, San Dimas and Oceanside.
The market value of the most expensive single-family home listed is a three-bedroom Lake Elsinore house listed at $250,000. The least expensive is a two-bedroom home in Twentynine Palms in San Bernardino County whose market value was put at $42,500.
But many of the properties, including the San Bernardino home, are offered “absolute,” meaning that they will be sold to the highest bidder regardless of price. The remaining properties, including the Lake Elsinore house, are subject to a minimum seller’s reserve price. If the bids do not exceed that price, Freddie Mac can decide not to sell the property.
Freddie Mac and its larger cousin, Fannie Mae (the Federal National Mortgage Assn.), are two quasi-government enterprises that Congress chartered more than two decades ago to funnel money from Wall Street into housing.
The publicly held companies support the nation’s real estate market by purchasing home mortgages from thrifts, banks and other lenders.
They also package mortgages into “securities” that can be traded or held by investors, who receive interest and principal payments on the mortgage-backed securities, which are guaranteed by the companies.
In recent weeks, the Bush Administration and Congress have been seeking to tighten federal oversight of the two government-sponsored corporations out of concern that the billions in mortgage securities the companies have issued represent a potential liability to the U.S. taxpayer of an estimated $800 billion.
However, Eric Piccinini, director of real estate-owned operation in Freddie Mac’s suburban Washington headquarters, said neither the Southern California auction nor the consolidation of Freddie Mac’s foreclosure offices is in response to federal efforts to tighten control over the mortgage corporation.
“The consolidation is independent of all of that,” Piccinini said. “It’s no secret that we are seeing high levels of defaults and foreclosures on properties, and we expect it to continue. We think the values we get at auctions are very comparable to what we get at retail. We are doing this because it’s a win-win situation for the seller and the buyer.”
Housing Auction
* Who: Federal Home Loan Mortgage Corp., popularly known as Freddie Mac, with auctioneer Kennedy-Wilson Inc.
* What: Auction of 248 residential properties in Los Angeles, Orange, San Diego, Riverside, San Bernadino, Ventura and Kern counties.
* When: July 25 and 26.
* Where: Los Angeles Convention Center on July 25; Westin-South Coast Plaza Hotel in Costa Mesa on July 26.
* Registration: Required prior to auction day. Approved bidders must present $2,500 or cash equivalent for each property they intend to bid on.
* Inspections: Properties can be inspected prior to auction.
* Terms: Most properties will be sold to highest bidder. In some cases, a “sellers reserve” has been established; if bid is below the reserve price, Freddie Mac can reject it.
Deposit: Winning bidders must put down 5%.
* Financing: Freddie Mac has arranged financing for qualified buyers for all properties.
* Information: More information can be obtained by visiting the Freddie Mac Auction Information Center at Kennedy-Wilson headquarters, 2950 31st St., Suite 300, Santa Monica, or by calling 800-522-6664 ext. 65952
Source: Kennedy-Wilson Inc.
