Fannie Mae calls its latest REO home sales program "First Look," but investors might want to call it "Second Look."

That's because the "first look" at all of Fannie's new REO listings, starting this month, will now go to home buyers who plan to occupy the units they purchase, or to local public agencies participating in "neighborhood stabilization" or community development programs.

When Fannie lists one of its tens of thousands of foreclosed and repossessed houses for sale through a participating real estate broker, investors will be barred from submitting bids for the first fifteen days.

During that time, Fannie will only consider offers from owner-occupant purchasers and local agencies -- even if investors are ready to make superior, all cash competing bids.

Once the fifteen days are up, everybody will be free to bid - investors, ordinary home buyers and government agencies.

Terry Edwards, Fannie's executive vice president for credit portfolio management, explained that the company is intentionally trying to give a leg up to ordinary buyers over private investors in order to increase owner occupancy levels in neighborhoods hard hit by waves of foreclosures.

"First Look provides owner occupants and public entities that are committed to the community an early opportunity to purchase one of Fannie Mae's REO properties," he said.

Under the revised First Look policy, owner occupants who have qualified for local financing assistance using the Obama administration's neighborhood stabilization program will also be eligible for deal-sweeteners that won't be available to investors.

For example, they won't have to come up with the usual earnest money deposits that other bidders are required to make, but instead can put down as little as $500 to tie up the property. Owner occupant purchasers will also get up to 45 days to close on their transactions -- 15 days longer than other bidders get from Fannie Mae.

Despite the second tracking for private investors, however, Fannie will continue to offer its favorable Home Path financing options for investors -- including low downpayments and no appraisal fees.

What's the likely impact of the new policy on investors? At the moment that's not clear. Investors have been key partners to Fannie in disposing of its ever-growing inventory of REO, and Fannie's goal as a corporation remains that of maximizing its returns on its assets. Fannie doesn't want to chase away investors.

But let's face it: Fannie is also a totally federally controlled entity today -- and politically it makes a lot of sense to work with the Obama administration when it comes to promoting home ownership.

Published: December 4, 2009

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.