Freddie Mac said Monday it is trying to move its inventory of repossessed residences by offering to pay closing costs and to purchase home warranties for buyers.
Seized properties have become an albatross for Freddie as mortgage defaults climb and house prices tank. The government-sponsored enterprise's inventory surged 58% from a year earlier, to 29,151 residences (most of them single-family) at the end of the first quarter even as dispositions accelerated 140%, to 14,184 homes, according to Freddie's first-quarter filing with the Securities and Exchange Commission.
Freddie, of McLean, Va., took an average loss of 36.7% on the sales of such properties during the first quarter, up from 21.4% a year earlier.
Freddie said Monday that it will pay up to 3.5% of the sales price to cover buyers' closing costs, potentially saving them thousands of dollars. To qualify for this offer, buyers must submit purchase offers by Oct. 31 and close by yearend.
The two-year warranties, provided by Cross Country Home Services Inc., will be an ongoing offer. They cover electrical, plumbing, air conditioning and heating systems, as well as duct work and appliances such as water heaters, stoves, washers and dryers, dishwashers and refrigerators. When the warranties expire, homeowners will have the option of renewing at their own expense.
Cross Country will also guarantee each repair made under the warranty for 180 days. Each warranty provides discounts of up to 30% on the purchase of certain appliances and up to 15% on their installation.
To be eligible for the warranty, a home must be sold for at least $25,000 in the 48 contiguous states or the District of Columbia. The warranty and the closing cost offer are only available for properties purchased as primary residences; those purchased by speculators, or as second or vacation homes, are ineligible.
