FHFA, Treasury, HUD Seek Input on Disposition of Real Estate Owned Properties
Range of Ideas Sought, Including Transition to Rental
Washington, DC — The Federal Housing Finance Agency (FHFA), in consultation with the U.S. Department of the Treasury and Department of Housing and Urban Development (HUD), has announced a Request For Information (RFI), seeking input on new options for selling single-family real estate owned (REO) properties held by Fannie Mae and Freddie Mac (the Enterprises), and the Federal Housing Administration (FHA).
The RFI’s objective is to help address current and future REO inventory. It will explore alternatives for maximizing value to taxpayers and increasing private investment in the housing market, including approaches that support rental and affordable housing needs.
“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.”
“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.”
“Millions of families nationwide have seen their home values impacted as their neighbors’ homes fall into foreclosure or become abandoned,” said HUD Secretary Shaun Donovan. “At the same time, with half of all renters spending more than a third of their income on housing and a quarter spending more than half, we have to find and promote new ways to alleviate the strain on the affordable rental market. Taking steps to encourage private investment in REO properties and transition them into productive use will help stabilize neighborhoods and home values at a critical time for our economy.”
The RFI calls for approaches that achieve the following objectives:
reduce the REO portfolios of the Enterprises and FHA in a cost-effective manner;
reduce average loan loss severities to the Enterprises and FHA relative to individual distressed property sales;
address property repair and rehabilitation needs;
respond to economic and real estate conditions in specific geographies;
assist in neighborhood and home price stabilization efforts; and
suggest analytic approaches to determine the appropriate disposition strategy for individual properties, whether sale, rental, or, in certain instances, demolition.
FHFA, Treasury and HUD anticipate respondents may best address these objectives through REO to rental structures, but respondents are encouraged to propose strategies they believe best accomplish the RFI’s objectives. Proposed strategies, transactions, and venture structures may also include:
programs for previous homeowners to rent properties or for current renters to become owners (“lease-to-own”);
strategies through which REO assets could be used to support markets with a strong demand for rental units and a substantial volume of REO;
a mechanism for private owners of REO inventory to eventually participate in the transactions; and
support for affordable housing.
Link to RFI
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Media Contacts:
FHFA Corinne Russell (202) 414-6921
HUD Tiffany Thomas Smith (202) 708-0980
TSY Matt Anderson (202) 622-0631
The Obama administration will announce plans Wednesday to seek investors’ ideas for turning thousands of foreclosed properties owned by government-backed entities into rental homes, according to administration officials.
The move is intended to put a floor under declining home prices by creating a way to deal with hundreds of thousands of potential foreclosures in coming years.
Mortgage giants Fannie Mae and Freddie Mac sold a record 100,000 homes during the second quarter. Together with the Federal Housing Administration, the entities owned about 250,000 homes at the end of June, or around half of all unsold, repossessed properties. Another 830,000 homes …
Two House Democrats have introduced a bill to create a “right to rent” for homeowners facing foreclosure.
The bill, sponsored by Rep. Raúl M. Grijalva (D-Arizona) and Rep. Marcy Kaptur (D-Ohio), would allow a family receiving a foreclosure notice to petition a judge to stay in their home as renters under a 5-year lease. The judge would appoint an independent appraiser to set fair market rental value, which would be allowed to rise with inflation.
In a statement to the press, Grijalva cited the latest market data from RealtyTrac, which showed that foreclosure activity nationwide rose by 19 percent in March, setting a new monthly record of 367,000 filings. RealtyTrac also found that for the first three months of 2010, foreclosures are up by 60 percent compared to 2009 and roughly 6 million mortgages are at least 60 days delinquent.
Grijalva called the latest statistics “an indication of the profound, historic crisis we face and the need for creative solutions like Right to Rent. I call on the rest of Congress to take a hard look at why we’ve allowed things to get this bad,” he said.
According to Grijalva, the administration’s Home Affordable Modification Program (HAMP) just isn’t doing enough to keep pace with the nation’s mortgage problems. Between February and March, the number of people who received assistance through HAMP but subsequently became delinquent again nearly doubled from 1,499 to 2,879.
“HAMP is simply an insufficient response to this crisis,” Grijalva said. “Right to Rent is a fair and sensible solution for struggling homeowners. Banks will still get reliable rental income, and families will be able to stay in their homes and significantly lower their monthly housing costs.”
Grijalva called the terms of the bill (H.R. 5028) “a workable and equitable compromise for lenders, families, and communities.”
He said, “Passing this bill will help neighborhoods avoid the spiral of decay, crime, and lower property values that often follows mass vacancies without creating any new bureaucracy or transferring a dime of taxpayer money to homeowners or banks.”
To prevent use of the program by speculators, eligibility for the “right to rent” initiative would be limited to homes purchased at or below the median price for their metropolitan statistical area, and must have been the homeowner’s principal residence for no less than 2 years, Grijalva explained. Only mortgages originated before July 1, 2007 would be eligible.
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