A third party review of bidder applications to the Federal Housing Finance Agency's REO-to-rental program will conclude in the next few weeks, said Meg Burns, FHFA senior associate director for housing and regulatory policy.

Speaking Monday before the House of Representatives Committee on Financial Services, Burns said once the process is complete, approved applicants will be notified and the bid process will begin. The FHFA plans to complete the first pilot transaction in the next few months.

In February, the FHFA announced the first pilot transaction under the Real Estate-Owned Initiative, whereby the government will take bids on government-sponsored enterprise REO. The agency took bids on nearly 2,500 properties in Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix and Florida.

Applicants were expected to detail their plans for operating a first-rate rental program and were required to explain how they’ll rely on local and regional organizations to tailor their programs to meet the needs of residents. Investors had to describe what resources they will call upon to ensure that properties are repaired, leased quickly and well maintained and also guarantee that residents receive the services they need.

“There is an expectation that local construction and repair companies will be engaged due to their familiarity with state and local building codes,” Burns said. “That local property management firms will have knowledge of the potential tenant population in the area and the best means of marketing to these citizens, and that community-based nonprofits may provide supportive services to the residents.”

The program requires new owners to pay for tenants to receive credit counseling at their request in order to help repair their credit and get them on more stable footing.

Fannie Mae and Freddie Mac own about 180,000 REO properties, of which half can be made available for sale at any point in time. They own or guarantee about 1.3 million non-performing loans, the majority of which are more than a year delinquent.

The intent of the program is to gauge investor appetite for a new asset-class — scattered site single family rental housing — as measured by the price that investors are willing to pay for a traditionally high-value commodity that has been hampered by oversupply. The FHFA hopes to determine whether the disposition of properties in bulk, as opposed to one-by-one, presents an opportunity for well-capitalized investors to partner with regional and local property management companies to create appropriate economies of scale

More detailed information on the number of properties in each location is available here.