Nearly 20 members of California’s congressional delegation sent a letter last week to FHFA Acting Director Edward DeMarco urging him to refrain from implementing the agency’s REO pilot program in the state.
California Congressman Gary Miller, R-Brea, along with 18 other members of California’s congressional delegation, said the program would negatively impact the state’s housing market and raise costs for taxpayers.
“We are concerned that including California counties in this initiative is in direct conflict with your duty as conservator to preserve and conserve the Company’s asset,” the letter states.
“In California, there is no question that disposing properties through bulk sales will yield a lower return for the government-sponsored enterprisess and taxpayers than through traditional disposition methods," the letter continues. "This means that such a program will increase losses to the taxpayer and GSEs.”
The Federal Housing Finance Agency began the program in February to more efficiently sell bulk real estate-owned property held by Fannie Mae and Freddie Mac to investors. The program calls for the sale of more than 600 Fannie Mae-owned foreclosed homes in Los Angeles and Riverside counties to institutional investors.
The California Association of Realtors applauds the letter. The organization believes the REO program is detrimental to the state’s housing market because housing inventory is extremely low and demand is high.
However, more than 23% of the Fannie Mae REO inventory is located in California, the most of any other state at the end of 2011. The next closest is Florida, at 11.5%.
Homebuyers in most of California’s markets are experiencing multiple offers, CAR points out, including for distressed and foreclosed properties. According to the association, sales of bank-owned homes are closing in an average of less than 60 days — and often above the list price — without government intervention.