Property Reference: F

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Freddie Mac

Freddie Mac (or the Federal Home Loan Mortgage Corporation) is a stockholder-owned, publicly-traded company chartered by the Unted States federal government in 1970 to purchase mortgages and related securities, and then issues securities and bonds in financial markets backed by those mortgages in secondary markets. Freddie Mac, like its competitor Fannie Mae is regulated by the Office of Federal Housing Enterprise Oversight (OFHEO) in the United States Department of Housing and Urban Development. The company is based in McLean, Virginia.

Federal National Mortgage Association

The United States Federal Government created the Federal National Mortgage Association (FNMA—aka Fannie Mae) in 1938 to establish a secondary market for mortgages insured by the Federal Housing Administration (FHA). Fannie Mae buys mortgages on the secondary market, pools them and sells them as mortgage-backed securities to investors on the open market. This secondary mortgage market helps to replenish the supply of lendable money for mortgages and ensures that money continues to be available for new home purchases.

In 1968, the Federal National Mortgage Association was partitioned into two separate entities—one wholly owned by the government and known as the Government National Mortgage Association (Ginnie Mae), and the other to retain the name Federal National Mortgage Association (Fannie Mae). At this time Fannie Mae expanded its charter to buying other sorts of mortgages besides the government insured ones it had traditionally purchased.

Today, Fannie Mae is a consistently profitable American corporation. While it receives no direct government funding or backing it has certain looser restrictions placed on its activities than normal financial institutions. For example, it is allowed to sell mortgage backed securities with half the capital backing them up than is required by other financial institutions. Critics, including Alan Greenspan, say that this is only allowed because investors seem to think that there is a hidden, or implied, guarantee to the bonds that Fannie Mae sells [1] (http://www.federalreserve.gov/boarddocs/testimony/2004/20040224/default.htm). Although the company describes them as having no guarantee, nevertheless the vast majority of investors believe that the Government would prevent them from defaulting on their debt, and so buy bonds that are very low interest rates compared to the risk.

Federal Housing Administration

The Federal Housing Administration was begun as part of the New Deal in 1934. It guaranteed private home mortgages (FHA loans) and provided funds to promote housing construction, especially for poorer people.

Freehold/Fee simple

Fee simple, also known as fee simple absolute or allodial, is a term of art in common law. It is the most common way real estate is owned in common law countries, and is the most complete ownership interest one can have in real property. In common law legal terminology, one does not “own” the real estate; one has an estate in the land conferring certain rights. The fee simple estate is also called “estate in fee simple” or “fee-simple title.”

Having its origins in feudalism, one who has a fee simple interest has complete dominion over the real property. According to William Blackstone, the great common law commentator, fee simple is the estate in land which a person has when the lands are given to him and his heirs absolutely, without any end or limit put to his estate. Land held in fee simple can be conveyed to whomever its owner pleases; it can be mortgaged or put up as security as well. No rent or similar obligations are due from the owner of property in fee simple.

Fee simple can be contrasted with a life estate, which is an interest in lands that terminates upon the owner’s death and reverts to the grantor or the grantor’s heirs according to the terms of the instrument. It also was formerly contrasted with fee tail, traditionally created by the words of grant “to N. and the heirs of his body”; under fee tail, the owner could not alienate the property, which was supposed to be passed on to the direct descendants of the owner.

Other estates in land include the defeasible estates. Defeasible means that the estate can be annulled or voided. Examples of a defeasible estate are the fee simple determinable (aka determinable fee) and the fee simple on condition subsequent.

Foreclosure

Foreclosure is the legal proceeding in which a bank or other creditor gets the deed on a piece of real property due to the owner default of their promissory note.

In most common law states, there are two sorts of foreclosure: “strict foreclosure,” in which the bank claims the title and possession of the property back in full satisfaction of a debt, usually on contract; and the proceeding more generally known as foreclosure, in which the property is exposed to auction by the county sheriff or some other officer of the court. Many states require this latter sort of proceeding in some or all cases of foreclosure, in order to protect any equity the debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the property. In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders typically bid in the amount of the owed debt at the sale, and if no other buyers step forward they get title to the property in return.

In most jurisdictions it is customary for the foreclosing lender to run a title search of the property and to name all other persons who may have liens on the property, whether by judgment, by contract, or by statute or other law, so that they may appear and assert their interest in the foreclosure litigation.