
The initiative announced last year to convert approximately 180,000 government foreclosures into rental properties through partnerships with private equity firms and other investors is picking up steam this week as both Fannie Mae and Freddie Mac announced pre-qualified bidding for interested parties.
The proposal – which would sell foreclosure homes, often in bulk, to private investors from government inventory – is set to go live in the “near term”, according to the Federal Housing Finance Agency. According to reports, the two government-sponsored enterprises will allow pre-qualification for investors and third parties who want to bid on foreclosure properties owned by the government. This effectively opens the doors for foreclosure investors to get in line for bidding and save time before the full allotment of government foreclosure listings becomes available.
Government foreclosures come from several sources, most notably Department of Housing and Urban Development (HUD homes) and the Department of Veterans Affairs (VA homes). These homes come under government ownership when the federal government – due to its role as the guarantor of the mortgage secured by the property in question – takes possession of the home due to the homeowner’s default.
The hope is that investors and private equity firms will want to capitalize on a large inventory of cheap residential real estate properties that can be converted into income-generating rental properties – which are in high demand and have been for the past two years from previous homeowners, those looking to avoid buying a house in this climate, and those relocating for jobs.
As it stands now, the rental market suffers from a lack of supply while the housing market suffers from a glut of supply – a glut that has kept prices going down more and more with each quarter.
Already several major private equity firms have thrown their hat into the ring and announced intentions to actively participate in the government program. Some estimate that the foreclosure-into-rental market could be worth billions in the long run, and could deliver economic benefits to the economy as a whole beyond the profits obtained by investors if mass purchases cause home values to rise throughout the country.
The timeline for the full implementation of the program is still unclear, but the FHFA is seeking to make this a reality sooner than later – especially given the political pressure from the White House to bring stability to the housing market before presidential elections in November. Chances are the housing market will be a key issue.
Federal Foreclosure-into-Rental Program Picks Up Steam is a post from: Foreclosure Magazine - Read more about how does foreclosure work.








