On December 27, 2011, John Gittelsohn, of Bloomberg News, reported that the Federal Housing Finance Agency (the regulator and conservator of Fannie Mae and Freddie Mac and the regulator of the nation’s twelve Federal Home Loan Banks) had issued an RFP for ideas related to turning a portion of their expansive inventory of repossessed homes into rental units. The government’s strategy seeks to “reduce losses, stabilize neighborhoods and support housing values.” *
Among the four hundred-plus “valid” proposals received were submissions from the same financial and investment companies that played a part in the housing bubble and collapse, including Deutsche Bank AG, Fortress Investment Group LLC, Carrington Holding Co., Barclays Capital Inc., and UBS AG. With more than 6 million homes expected to be repossessed by banks by 2016, with Fannie Mae and Freddie Mac servicing more than half of all US home mortgages and with the demand for rentals far outstripping the demand for home ownership, a foreclosure-to-rental program could have a substantively positive effect on the stabilization of real estate values.
Or, conversely, is it another opportunity for the same investors who sold the American Dream of home ownership down the river to gamble yet again with the national housing market and the U.S. economy? Will turning foreclosures into rentals in bulk benefit Wall Street more than Main Street?
*“Firms Give U.S. Plans to Rent Seized Homes,” by John Gittelsohn, December 27, 2011 12:01 AM ETTue Dec 27 05:01:00 GMT 2011
– Susan H. Tifft, NHS of Baltimore Resource Development Committee
Link to the article here
Thursday, January 19, 2012
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Really nice tips and good informative blog to talk about. Thanks!foreclosuresus.com
ReplyDeleteA program like this would just reflect reality. The 99pc would surely benefit. The rental market is very tight and having more units hit the market would benefit people who do not own homes, especially because theirs' have been foreclosed on. As a UK citizen, I wish they'd implement something like that back home.
ReplyDeleteSurely the part of the 99% that does not own homes – whether because they were priced out of
ReplyDeletethe market during the "bubble" or lost them to foreclosure during the "bust" – will benefit from a
larger supply of rental housing. Supply will drive the cost of renting down, we hope. My
question is this: What happens to a neighborhood built on the premise of homeownership that
then transitions to a neighborhood of rental housing? NHS of Baltimore has traditionally
operated on the principle that homeownership revitalizes and strengthens communities. Can
rental units have the same effect?
While converting the agencies' REO stock to rentals has merit, it won't work in all markets.
DeleteAs pointed out in the the February 23 Wall Street Journal article, "Ranieri: The Case for Converting Foreclosures to Rentals" some markets will not be suitable. In particular, despite its glut of agency-owned REO stock, Las Vegas does not have a strong economic/demographic outlook and will not be able to easily absorb additional rental units. Other markets such as San Francisco have steady job/demographic growth and limited rental stock, but lack the REO stock for a successful program.
At any rate, FHFA announced the first transaction under the recently launched the REO Initiative. The initiative will target Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix and parts of Florida, widely acknowleged as the hardest hit areas.
Here's the link to the press release with information on the program:
http://www.fhfa.gov/webfiles/23403/REOPR22712F.pdf
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ReplyDeleteThe danger with housing is that theirs much pent up demand in the system since 2007 the housing market has been in decline not just price wise declines have taken place in the movement of inventory on the market. On the other hand household formation has been expanding since 2007 by how much at least 1% a year. Their are few new homes being constructed so the real potential now exsists for another housing boom to occur because of low mortgage rates. The problem is the federal reserve needs to act now to head of another potential housing boom and bust. What many folks forget is that the price of homes in the united states is far lower now than any other industrialized country in the world. I recently was listening to some news story about the housing market in miami its red hot they were saying foreigners are buying everything in sight in some areas of miami This foreign demand along with domestic demand along with super low interest rates has the real potential to run off the rails if caution is not carefully exercised by the government by buyers and sellers by banks and mortgage companies and realtors. I can hear the chatter once again buy now theirs never been a better time to buy the young couple in their twenties is hearing it from the real estate guy in the office this will be a once in a lifetime opportunity what happened over the last five years was an extraordinary coincidence it will never happen again in are lifetime. So says that seeming bright eyed realtor with the frickes that looks like he's twentyone but is really twentyeight.
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