REO'S and Foreclosures vs Rental Market

After an extended period of talking about selling off their massive inventory of foreclosed properties (Real Estate Owned properties, or REOs), the Federal Housing Finance Agency today announced the kickoff to their initiative to sell their inventory to investors in an effort to turn them into rental properties to serve the new generation of renters, many of whom are former homeowners. The vision is to reduce the number of vacant homes and increase the availability of rental units as the market shifts.
The initiative is aimed at the areas hit hardest by foreclosures, where entire streets are sitting vacant as the virus of foreclosures has hit – with one house getting foreclosed upon then becoming vacant, pulling the values of surrounding homes down as it sits on the market at a slashed rate, then another home is foreclosed upon and goes vacant, pulling values down even more, and so on and so forth. These undesirable areas could theoretically be improved as they are bought by investors through the government.
FHFA is now allowing interested investors to pre-qualify for the program and ultimately, investors will be able to invest in pools of foreclosed properties, with the agreement that they will turn the properties into listings for a predetermined number of years.
The FHFA said in a statement, “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. Pre-qualification 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.”
FHFA Acting Director Edward J. DeMarco said, “This is an important step toward increasing private investment in foreclosed properties to maximize value and stabilize communities. I am grateful for the collaborative effort by the many stakeholders including investors, nonprofit organizations, and state and local government officials, who have worked together on this Initiative.”