The federal REO Rental Initiative took its first step on Feb. 1 when the Federal Housing Finance Agency announced that investors could begin pre-qualifying for the upcoming bulk sales of real estate–owned (REO) properties belonging to Fannie Mae.

Then last week, Multifamily Executive and Apartment Finance Today reported that Freddie Mac is in the early stages of developing its first-ever “multisite” multifamily loan product, which could help clear single-family inventory by increasing the number of investors who qualify to purchase the bulk REO properties held by Freddie Mac and Fannie Mae.

Freddie and Fannie have remained tight-lipped about the potential financing for transactions under the REO initiative, leaving room for speculation about the types of deals available for investors.

“Geographic concentration is the most-talked-about factor right now,” says Doug Brien, co-founder and managing director of Oakland, Calif.–based Waypoint Real Estate Group. “We’re only looking at areas with growing economies and attractive percentage yields for buying single-family property.”

Waypoint recently received a $250 million initial investment from Menlo Park, Calif.–based GI Partners to purchase foreclosed single-family homes and convert them to rentals. Over the next two years, GI Partners plans to invest $1 billion in Waypoint to buy and manage new acquisitions. Brien says the company is looking at pools in Phoenix, Atlanta, Las Vegas, Chicago, and southern Florida.

New York–based GTIS Partners is also eyeing bulk REO portfolios, in Florida, Arizona, and California. The company announced that it plans to spend $1 billion by 2016 on single-family properties to manage as rentals in order to meet growing demand.

“Investors will be able to offer higher up-front prices for the homes if attractive financing is available, which in turn will act as a stabilizer for the market as a whole,” said Thomas Shapiro, president of GTIS Partners, in an interview with Businessweek.

Concerns do exist that investing in single-family property pools that are too geographically spread out will create management problems. In a joint statement from the National Multi Housing Council (NMHC) and the National Apartment Association (NAA), Cindy Chetti of the NMHC said, “We will be analyzing the president’s proposal to ensure that it includes proper oversight and incentives to avoid creating landlords in name only who are not investing in proper maintenance. We would encourage the government to rely on trained, professional management entities to handle these properties. Mismanaging these rentals would make an even bigger mess out of our already struggling housing sector.”

Plus, according to a Federal Reserve white paper released on Jan. 4, “Not all of these REO properties are good candidates for rental properties, even in geographic markets with sufficient scale. Some properties are badly damaged, in low-demand locations, or otherwise low value.” This fact isn't lost on investors.

Many are hoping to have the option of cherry-picking properties within each pool to help manage the scale of the investment. “I hope it’s not an all-or-nothing situation,” says Brien. “Ideally, we’ll be able to choose the ones we want to keep.”

Although it hasn't been officially announced, it's rumored that Freddie Mac’s program won't be as restrictive as Fannie’s bulk-only sale. It’s believed Freddie will allow investors to use a variety of methods to purchase specific REO single-family homes within an asset pool.

And the consensus seems to be that injecting some health back into the single-family sector will only strengthen the metro housing market in general.

Currently, Atlanta has the most REO properties for sale by the GSEs. The REO portfolios in that region could be among the first made available during the pilot phase. One of the hardest-hit housing markets, Atlanta’s average home values dropped more than 12 percent in 2011—the highest of any of the 25 largest metropolitan areas covered in Zillow’s Home Value Index.