FHFA launches pilot REO property sales
The Federal Housing Finance Agency announced Monday the first pilot transaction under the Real Estate-Owned Initiative, whereby the government will take bids on government-sponsored enterprise REO.
The agency will take bids on nearly 2,500 properties in Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix and Florida.
Prequalified investors can submit applications to demonstrate their financial capacity, experience and specific plans for purchasing pools of Fannie Mae-foreclosed properties. Investors must rent out the purchased properties for a specified number of years. The agency began the prequalification process earlier this month.
The FHFA first disclosed in December that it had begun to develop new pilot programs to more efficiently unload foreclosed homes held by Fannie Mae and Freddie Mac.
The FHFA set off industry-wide discussion in August 2011 when it announced the REO-bulk sales initiative that aims to repair the hardest-hit housing markets by selling off bulk assets to investors who have the ability to turn those properties into rentals.
The program's purpose is to clear the national backlog of distressed housing. Fannie Mae holds 122,000 properties in its REO inventory. Freddie Mac has about 60,000.
The agency received more than 4,000 submissions to its request for information sent to the housing industry in August.
Analysts at Morgan Stanley estimate the program will create up to 1.8 million jobs in the hard-hit construction and real estate industries. The jobs could be created by private capital without the use of taxpayer dollars.
In January, Federal Reserve Ben Bernanke sent a letter in January to Congress proposing the REO rental program.