I just experienced the worst transaction in my 33 year career selling a Fannie Mae (FNMA) property. The primary problem happened because the subject property should have never been listed until clear title was obtained. However, between the National Title company selected by FNMA and the FNMA Asset Manager, this "not-so-small" issue became a costly last minute (43 day past close of escrow date) issue. In October 2010, the home was given back to FNMA under a Deed in Lieu of Foreclosure. Since the loan was a Reverse Mortgage backed by HUD's Senior Services department, HUD actually needed to provide a Re-Conveyance Deed before clear title could be obtained by FNMA. Due diligence was not done and FNMA assigned the listing to an unsuspecting local Real Estate Broker to sell.
During the original contract negotiations, FNMA took two weeks to sign the purchase contract which wasn't too unexpected. A cover letter from FNMA with escrow opening instructions was provided by the Listing agent. Once final approval signatures were obtained, earnest money was deposited with First American Title as per the cover letter. Two days later, a California escrow company representative called demanding to know why I had opened escrow with First American. The California escrow company representative agreed to let the escrow stay in Arizona with First American but two days later (without any notice to me or the Buyer) the escrow was transferred to the California escrow company by the FNMA Asset Manager. Little did I know that this was the beginning of a transaction fraught with incompetence, lack of communication plus no accountability to the taxpayer/buyer.
My Minnesota Buyer and his Minnesota lender worked diligently to have loan documents to the California escrow company in order to meet our December 27th closing date. FNMA threatened to cancel the sale if we could not meet this date. FNMA requires that the Buyer's final HUD-1 closing statement in all real estate transactions be provided to them 72 hours prior to closing for final review & acceptance. The Buyer flew to Arizona to sign the documents and get them back to California in a timely manner. A mobile notary had to be sent to obtain the Buyer's signatures on the loan documents and all the escrow documents were sent to me (the Buyer's Broker) to obtain signatures via the internet. There were very few escrow documents without errors and we had to email back and forth to get them corrected. Luckily, the Lender's documents were not full of errors. The documents were returned to California and that is when the title issue was finally revealed. No one knew anything and the FNMA Asset Manager was not returning calls or providing information. The preliminary title report was also vague regarding the title issue.
The Dec. 27th closing didn't occur. Escrow company was told they should have the needed Re-conveyance Deed by 1/21. An escrow extension addendum was drawn to extend closing to 1/21 but never signed nor responded to by the Asset Manager. The water was put into the Buyer's name on 12/27/2010 although they didn't own it. The hot water heater broke and flooded a portion of the home & garage. Listing agent fixed the issue immediately but FNMA asset manager was not happy with how this was handled. A second escrow extension addendum was drawn but not signed until 2 days prior to close. We finally were advised that the much needed Deed of Re-Conveyance had been received & electronically recorded January 4th but neither the FNMA asset manager nor First American Title advised the California escrow company of this fact until January 31st. Escrow finally closed 2/8/2011---43 days late. Cost to the Buyer was over $1,000 (plus plane fare & a $47 water bill). FNMA Asset Manager refused to reimburse the Buyer for their additional costs which were could be attributed to FNMA's lack of due diligence. We learned the hard way that when you deal with FNMA...it's their way or the HIGHWAY!!!
