(8/15/2011) - Federal agencies are scrambling to come up with ways to get
rid of 250,000 properties in various stages of distress and are leaning
heavily toward making many of them rentals.
The Federal Housing Finance Agency (FHFA), in conjunction with the U.S.
Department of the Treasury and U.S. Department of Housing and Urban
Development (HUD), has announced a "Request
for Information: Enterprise/FHA REO Asset Disposition", seeking input
from both the public and private sectors on options for moving off the books
residential real estate owned (REO) properties held by Fannie Mae, Freddie
Mac (GSE's or "Government Sponsored Enterprises") and the Federal Housing Administration(FHA).
Federal agencies own a quarter million properties with only about 70,000 of
them currently listed for sale. Buyers have made offers on another 22,000 of
them, but the bulk, about 158,000, are in limbo.
The Feds want to reduce agencies' carrying costs, including loan losses,
and address repair and rehabilitation needs (taxpayers foot the bill) in a
manner that recognizes economic and real estate conditions and needs in
specific locations, while helping stabilize falling prices exacerbated by the glut of distressed
properties.
"While the Enterprises will continue to market individual REO properties
for sale, FHFA and the Enterprises seek input on possible pooling of REO
properties in situations where such pooling, combined with private
management, may reduce Enterprise credit losses and help stabilize
neighborhoods and home values," said FHFA Acting Director Edward J. DeMarco.
"Partnerships involving Enterprise properties may reduce taxpayer losses
and meet the Enterprises' responsibility to bring stability and liquidity to
housing markets. We seek input on these important questions," DeMarco
added.
Federal agencies are looking hard at selling off pools of properties to
investors who will turn the REOs into rental units. It's a strategy that could help
ease tight rental markets.
The tactic is hard at work in places like Las Vegas and Florida where a glut
of distressed properties have squeezed million dollar homes until they are
worth only a quarter million dollars.
While some groups are purchasing distressed properties in bulk to flip
and resell, others are renting them out if they can get adequate cash flow
to make the deals pencil.
"It's going to be a cold winter. There's nothing we are seeing in jobs or
the economy or housing to make us believe there is any more good news for
this year. It's making it easy for investors to pick up homes and banks are
thinking about that," said Jon Sterling, Director of Marketing at Mountain
View-based Altos Research.
However, Feds aren't likely to put all their eggs in one basket.
Another idea includes allowing previous homeowners to rent properties and
perhaps even buy them back under a rent-to-own deal.
Current renters could also participate in rent-to-own deals, and the
homes could be put up for sale as reduced-price affordable housing.
"As we continue moving forward on housing finance reform, it's critical
that we support the process of repair and recovery in the housing market," said Treasury
Secretary Tim Geithner.
"Exploring new options for selling these foreclosed properties will help
expand access to affordable rental housing, promote private investment in
local housing markets, and support neighborhood and home price stability,"
Geithner added.
Follow the link to continue reading the related articles
