The Obama Administration, whose effort to keep homeowners from losing their houses to foreclosure has not met its stated goals, is now reportedly turning to investors for ideas about how to reduce the estimated 92,000 foreclosed properties that are currently owned by Fannie Mae, Freddie Mac, and the Federal Housing Administration.
The three government agencies own about half of the country's foreclosed inventory. The Federal Housing Finance Agency and HUD have issued a “request for information” to solicit proposals about what to do with these properties. The deadline for proposals is Sept. 15.
Several news outlets, including TheWall Street Journal, which broke the story, have reported that the administration is particularly interested in finding investors willing to convert and manage these properties as affordable rental housing. “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,” stated HUD Secretary Shaun Donovan, in a prepared statement.
Reuters reports that the administration is looking for private partners to acquire up to $30 billion in single-family real estate owned properties (REOs) that are currently on the books of Fannie, Freddie, and the Federal Housing Administration.
“The risk here is yet another housing program that’s undersubscribed and underperforms. But I still think this one makes a lot of sense, and good for the administration and the FHFA for trying it,” wrote Jared Bernstein, senior fellow with the Center on Budget and Policy Priorities, on the Huffington Post’s website on Wednesday.
The Treasury Department is also exploring ways to help one million homeowners avoid foreclosure through modifications of loans that were bundled into mortgage-backed securities but weren’t issued by Fannie or Freddie, according to TheWashington Post.
The total number of foreclosed homes the government might be on the hook for remains a moving target. MarketWatch quotes a Treasury official who said that there are “a number more” foreclosed houses that are close to being available but aren’t ready yet because they are stuck in an eviction process or they are being appraised and readied for marketing.
John Caulfield is senior editor for Builder magazine.