The Federal Housing Finance Agency (FHFA) today announced the first step of a Real-Estate Owned (REO) Initiative targeted at the hardest-hit metropolitan areas announced in August 2011. Investors interested in participating may “pre-qualify” to establish eligibility to bid on transactions in the initial pilot phase as well as subsequent phases.
The REO Initiative will allow qualified investors to purchase pools of foreclosed properties with the requirement to rent the purchased properties for a specified number of years. This rental period could provide relief for local housing markets that continue to be depressed by the volume of foreclosed properties, and provide additional rental options to certain markets. Prequalification ensures investors will have the financial capacity and operational expertise to manage properties in a way that is conducive to the stabilization of communities hard hit by the housing downturn.
During the pilot phase, Fannie Mae will offer for sale pools of various types of assets including rental properties, vacant properties and non-performing loans with a focus on the hardest-hit areas. The first transaction will be announced in the near-term.
California’s housing market is unique. California has an extremely low REO inventory where REO sales are getting top dollar in multiple offer situations. On average, REOs are sold are sold in less than 60 days. Bulk sales in California not only would have a negative impact on home prices, but would also push down home values for existing homeowners in those communities. C.A.R. is asking that the Federal Housing Finance Agency, Dept. of Treasury, and Dept. of Housing and Urban Development consider this program only in areas where REO inventory is abundant and selling in bulk makes sense.