Radar Logic questions government bulk REO sales program
Analytics firm Radar Logic said Wednesday a proposal that would allow REO properties tied to Fannie Mae and Freddie Mac to be sold in bulk could eventually cost taxpayers and hurt home values. Radar Logic made that statement in response to a Federal Housing Finance Agency proposal that would dispose of properties tied to GSEs via bulk sales to investors. "We are opposed to the plan being considered by the FHFA," Radar Logic said. "We believe it is damaging, dangerous and, frankly, will not work. As far as we can tell, the real beneficiaries of the proposed bulk sale would be the institutions who are allowed to buy these homes at substantial discounts, even to today's home values. Since their discount is our cost, we object and propose a relatively simple alternative that we believe will help bring the housing crisis to an end." Radar Logic submitted an alternative plan for the government's consideration this week. Instead of delivering bulk sales, Radar Logic's proposal would restructure seriously delinquent mortgages by bundling them into debt and equity securities that can later be sold to investors or held by the government as investments. "Such restructuring will prevent foreclosures and reduce the flow of homes into REO inventory," said Radar Logic. "It will also reduce losses on the distressed loans that would occur if the underlying homes were sold in REO sales." A second part of the proposal would allow the GSEs and FHA to rent properties held by the government through partnerships and private-sector property management firms. Analysts with Morgan Stanley (MS) noted investors are highly receptive to a bulk REO plan that would allow them to acquire distressed real estate for the purpose of turning them into rentals and collecting the yield on rental payments. Write to Kerri Panchuk.