Since everyone (taxpayers) will end up paying for it, it probably is important to review

The Federal Reserve recently came out with an unprecedented recommendation to create an “REO to rental” program by facilitating bulk sales to large investors.

Below is an excerpt taken directly from the ‘Plan to Help Responsible Homeowners and Heal the Housing Market’ Fact Sheet given to the press for President Obama's state of the union address:

When there are vacant and foreclosed homes in neighborhoods, it undermines home prices and stalls the housing recovery. As part of the Administration’s effort to help lay the foundation for a stronger housing recovery, the Department of Treasury and HUD have been working with the FHFA on a strategy to transition REO properties into rental housing. Repurposing foreclosed and vacant homes will reduce the inventory of unsold homes, help stabilize housing prices, support neighborhoods, and provide sustainable rental housing for American families.

Today, the FHFA is announcing the first major pilot sale of foreclosed properties into rental housing. This marks the first of a series of steps that the FHFA and the Administration will take to develop a smart national program to help manage REO properties, easing the pressure of these distressed properties on communities and the housing market.

So…having Fannie, Freddie and FHA bundle up foreclosed homes and sell them in bulk, at a discount, to "qualified bidders" (the link will take you to the actual PDF document outlining the financial qualifications needed to apply to be a ‘bulk buyer’) with the stipulation that they be turned in to affordable rentals, rather than sell them to first time buyers (or any other owner-occupied buyer) at the same discount, is the magic potion for our housing recovery? It looks to me like a back door way to reward campaign contributors and hedge funds. And as another back door bailout of the banks holding these bad loans (that are guaranteed by the GSE’s).

Who believes that having renters replace homeowners is better for housing values?

And who will be on the hook for the write downs required to sell these homes at a discount? US, you and me…the taxpayers, who have already bailed out the GSE’s to the tune of multiple billions of dollars…

Oh…and one more small item that causes me some concern is this language contained in the application to purchase these bulk REO (real estate owned) homes:

10. The undersigned acknowledges and agrees that any information furnished to the
undersigned or its agents or representatives by (or on behalf of) Fannie Mae in connection with
any specific offer or sale of any Assets (“Confidential Information”) is proprietary in nature and
must be kept confidential and not disclosed or revealed to any person or entity…

Now, when you read that everything about these sales must be kept ‘secret’ what does that lead you to believe?

If you have the time and inclination, email me with your take/opinion.

Thanks for reading…Steve Jackson