There’s a new government plan in the works that seeks to convert real estate owned properties (REOs) to rentals. The Federal Housing Finance Agency (FHFA) developed the plan to ease the amount of REO inventory held by the two government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, which own approximately 180,000 REO properties.
According to a recent article posted on mortgagenewsdaily.com, approximately one half of the GSE’s REO properties are available for sale at any given time and preparing them for sale often takes several months due to needed repairs or state mandated redemption periods. Meg Burns, FHFA’s Senior Associate Director for Housing and Regulatory Policy, did indicate that sales of these properties has picked up recently; however, she explained that there are an additional 1.3 million non-performing loans owned or guaranteed by the GSEs, the majority of which have been delinquent for over a year.
The FHFA’s REO-to-Rental Initiative, Burns said, is a pilot program, intended to enhance the GSE’s existing disposition methods. To date, these methods have mostly relied on retail sales strategies and selling properties one at a time.
The REO-to-Rental Initiative’s goals are as follows:
- To gauge investor interest for scattered site single-family rental housing and their price sensitivity.
- To determine whether disposing of properties in bulk presents an opportunity for well-capitalized investors to partner with regional and local property management companies and other community organizations, therefore helping to stabilize local markets.
- To assess whether the model can provide a worthwhile addition to the GSE’s existing strategies as well as other financial institutions with large REO inventories.
According to the article, the pilot program is highly targeted and will focus only on markets with a fundamental supply-demand imbalance. The idea is to correct market flaws on a regional or local level. Burns advised that any interested investors to be prepared for a rigorous application process. Applicants will be expected to prove they have sufficient capital and operational expertise as well as explain in detail their plans for the properties and how local organizations will be involved.
To read more about this program, click here: http://www.mortgagenewsdaily.com