Fannie and Freddie will put foreclosed housing into rental market

The White House has given the green light to a program that would put foreclosed properties held by us, taxpayers, in Freddie, Fannie, and the Federal Housing Administration on the rental market, sort of.

One proposal would sell packages of hundreds or thousands of foreclosed properties in bulk to investors that agree to rent them out. That approach is preferred by the Department of Housing and Urban Development, which is taking back properties as defaults mount on loans backed by the FHA.

Another approach would let investors enter joint ventures with Fannie or Freddie to invest in a pool of converted rental homes. A national property-management business would handle day-to-day landlord responsibilities. Investors would pay for rehabbing and maintaining properties and would share revenue from monthly rental income and the ultimate sale of the property. Such a joint venture would be modeled on the Resolution Trust Corp., which sold failed banks' assets in the early 1990s.

Jared Bernstein says this is a great idea:

Lots to like about this:

?Fan, Fred, and FHA own about half of foreclosed stock at this point (see graphic on left below), so there?s some potential volume here;

?especially in local markets with high foreclosures, home prices are still falling, while rental prices are rising;

?this can be done without Congressional approval, which is to say: it can be done.

But, I'm a bit with Kevin Drum in not entirely getting how this will significantly help.

Right now, investors are free to buy packages of foreclosed properties any time they want and then do whatever they like with them. Sell them, rent them, demolish them, whatever. The problem is that Fannie and Freddie are asking too high a price so no one is interested.[...]

This plan would presumably require F&F to offer their foreclosed homes at fire sale prices. But if we're willing to do that, why not just offer them at fire sale prices and be done with it?

Maybe this will ease the rental market in areas with high foreclosure rates, which would certainly be helpful, but it's hard to see how this program would make the foreclosed homes much more attractive to investors.

Now what would be an extremely helpful program that the administration could enact without Congress would be to allow the homeowners who are in foreclosure in these Freddie, Fannie and FHA homes to rent them directly from the entities. That doesn't deal necessarily with a huge inventory of foreclosed homes the government holds now, but it would help keep more homes out of that inventory. It would also ease the tight rental market by keeping more people out of it. It would help the stability of neighborhoods by keeping people in their homes. And if the houses would be sold at fire sale prices anyway, the rental income from the former homeowners would probably bring as much as the sale. Most importantly, though, it would keep people in their homes, affordably.

Source: http://feeds.dailykos.com/~r/dailykos/index/~3/UEd2PHkVoME/-Fannie-and-Freddie-will-put-foreclosed-housing-into-rental-market

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