In a bid to boost the falling home prices in localities around the country, the Federal Housing Finance Agency is considering a plan to rent out the foreclosed homes owned by Fannie Mae, Freddie Mac, and HUD.
Right now, FHFA is soliciting input from investors regarding this new rental proposal for government-owned REO homes.
Fannie Mae and Freddie Mac together account for the majority of the home loan financing, currently. They were taken over during the height of the credit crisis in September 2008. These two agencies along with FHA either own or guarantee most of the mortgages originated on residential real estate.
As soon as a property becomes part of the agency’s REO, it quickly tries to sell off the repossessed home after listing it through local agents. With the current glut in residential home sales, the listing and selling process has become more drawn out, while also impacting the local market values negatively.
The agency is hoping to lessen the impact of these listed REO homes on the neighborhoods by converting them into rentals.
Fannie, Freddie and HUD together hold about 250,000 foreclosed REO homes in their inventory. Out of which, just 70,000 are currently listed for sale. Moreover, a large number of households are giving up on owning a house and are instead renting. This shift in households is set to accelerate over the coming years.
The government is initially planning to roll out this new REO rental program in states that were affected the hardest during the housing meltdown. If the plan takes shape, soon Fannie Mae, Freddie Mac and HUD homes will be listed for rent in California, Arizona, Florida and Nevada. This is definitely a welcome move on the part of FHFA.