Awhile back, I touted this idea of taking the foreclosed properties owned by government-backed entities -- Fannie, Freddie, Federal Housing Administration -- off of the residential housing market and putting them into the rental market. Looks like it's a go from the White House.
Lots to like about this:
How will it work? From the Wall Street Journal:
The Federal Housing Finance Agency, which regulates Fannie and Freddie, will issue the formal "request for information" [RFI] with the administration to solicit proposals that shrink the glut of foreclosed properties weighing on the residential market.
I've heard two arguments against the idea. One is that it's a bad deal for taxpayers -- I mean, we're the "investors" behind these properties right now -- who will get stung by firesale prices. Eh -- maybe, but from what I'm picking up, that's happening anyway. The return on these sales is already lousy. I'd just as soon try something that could help carve out a real bottom on home prices.
Second, investors buying foreclosed properties in bulk make lousy landlords. It's a valid concern, but there's a policy wrinkle in the FHFA/admin's plan that should help: the proposal -- the RFI noted above -- should include requirements regarding property management and the Feds should reject proposals that aren't convincing in that regard.
The risk here is yet another housing program that's undersubscribed and underperforms. But I still think this one makes a lot of sense and good for the administration and the FHFA for trying it.
This post originally appeared at Jared Bernstein's On The Economy blog.
There has been no substantial. help to homeowners (fire Shaun Donovan) in this real estate devastation. Obama, Geithner have not even tried. Advertised low interest rates are simply "mortgage porn" at this point. There has been no attempt by this administration to aid homeowners in lowering interest rates or mortgage balances to market rates. Instead they underwrote Wall Street and banks, who bought mortgages for pennies on the dollar, then demanded the homeowners pay these same mortgages at full value. Loved Jaimie's
demand that homeowners 'need to honor their obligations" on paper that cost Chase maybe 30% max.
This nasty and evil proposal, to bundle up all these taxpayer owned properties and sell them off for pennies on the dollar to corporate investors sounds, like the "shock doctrine" finale to the real estate fraudsters who collapsed and have already profitted twice from their crime.
How is this any different from Scott Walker's agenda to sell power plants in Wisc to the Koch Bros at no bid, no bottom prices?
Vulture capitalists, banks, foreign countries...no they should not be given the ability to buy up our collective wealth and .become our national landlords.
This insidious plan belongs right up there with means testing social security, corporate income tax amnesty their offshore accounts, and payroll tax holiday for destabilizing the common assets and accelerating the transfer of public wealth to the top 1%.
I'm sure some will claim that it will skew both the rental market and the sales market. If it is a big program, the President will seek bi-partisan approval so even though he doesn't have to, he probably will let it get compromised to death.
Now, selling the properties at firesale prices to investors to rent makes no sense.
There is no reason the government can't contract with property managers directly. Taxpayers collect the rent above costs and still own the houses to be sold later when prices improve.
Altohone's suggestion makes more sense other than the logistics of managing the lot!
You really need to read more carefully.