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Government to unload foreclosures

By Judy Martel ·
Monday, January 9, 2012
Posted: 5 pm ET

A bulging pipeline is prompting the Obama administration to implement its plan to sell foreclosed properties in bulk to investors who will rent them out, potentially solving the problem of hundreds of thousands of vacant homes dragging down home values. According to CNBNC, the administration is close to announcing the pilot program, which is being conducted with government-owned mortgage companies Fannie Mae and Freddie Mac.

With approximately 250,000 foreclosed properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration, delays in processing have developed into a backlog that is preventing the agencies from getting the homes back on the market. Worse, there are even more potential foreclosures lurking. Lender Processing Services reports close to 2 million properties that are seriously delinquent.

Details about the government's plan to encourage private investors to buy the properties are still being worked out. They include pricing, how the public-private partnership will operate and what expertise is needed to manage large-scale property ownership. Previous attempts at enticing private investors such as hedge funds to buy homes in bulk have not appeared to be lucrative to the private sector, which is the major roadblock in moving forward with a plan. Private enterprise will invest when the numbers add up to a good deal, meaning they can justify the cost of managing hundreds of homes scattered in various locations, which is quite different than managing one building with multiple dwellings.

The goal of the program is to control supply and demand. By converting foreclosed properties into rentals, the supply of for-sale homes will diminish and that, officials hope, will stimulate the housing market.

What do you think of the government's plan to sell foreclosed properties to private investors?

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January 11, 2012 at 3:47 pm

Great way to finish off the rental market. Many of the homes in forclosure are rental properties that the tenants aren't paying on and the owners can't carry the payments without the rents.
Flooding the market with rental properties will lower the rents.
This will just make things worse very short sighted. (fixit to day so I can get elected tommorrow.)
Keep the people in the homes that they have been in. Gov insentives for banks and individuals to stay the course in their homes and tax credits based upon catching up with loans over the long haul 5,10,15 years. Back interest added to end of loan and reduced by tax credits the more you catchup on what you owe the bigger the credit. Gov loan to help defer the mortgage interest until off unemployment or solvent, added to back end of loan not released if sell or lose home.
Doesn't anyone in Gov have a clue?

January 11, 2012 at 3:47 pm

First, it was CNBC's Diana Olick that had the report.

Second, this is an atrocious idea that circumvents individual auctions. This keeps families, small investors, and small contractors looking for opportunities out of this market.

The only way you sell these properties through bulk is through a steep discount.

So, we allow money managers to purchase these places in bulk for 50% of retail value... they, of course, will use government financing facilities at below market rates, perhaps around the Fed Funds Rate of 0%... then, turn these homes around and flood the market for the low price of 70% of retail value, leaving them with a net 40% profit.

This is crony capitalism. This is anti-free market. The taxpayer will take the risk of the financing and take the pain of the liquidated bulk asset sales.

We all agree that this market needs to be cleared. However, it has to be cleared in a transparent and orderly manner. Excluding Ma and Pa from the ability to purchase these properties at a viable, all inclusive acution is nothing short of a crime.

If money managers want these properties, they are welcome to show up at each auction and put forth the highest bid. THAT's how markets work.

Robert Cowles
January 11, 2012 at 3:20 pm

Now we know just what kind of idiot our President is.

January 11, 2012 at 3:19 pm

I think the whole banking system needs to be re-vamped. First off the banks used TARP money (our taxpayer dollars) for the bailout. The banks promised more money available for small business loans, home mortgages instead they gave us tighter then ever guidelines for qualifying for loans so almost no one qualifies, raising interest rates on credit cards, then rewarded their executives that mis-managed funds in the first place HUGE bonuses! I think the FICO scoring needs to be re-vamped, it is not fair if you have been paying your bills on time and maybe you missed an on-time payment on one of your credit cards, maybe you forgot, were sick...etc, then not only do they jack up your interest rate on the card to 29.99% and reduce your limit to what you owe, it gives all the other credit cards free rein to jack up their rate to 29.99% and reduce your limit as well! Then, guess what your fico score goes way down because now you are maxed out then you get a higher interest on home loans, car loans! It's BS! Now they boot hard working people out of their homes because they have lost their jobs and it takes a year or 2 to find a new one because the economy is in the toilet and can't make payments, can't get loan modifications because they do not qualify or they owe more then the home is worth. Then it is supposed to be good news that Obama wants to sell foreclosed homes to investors for pennies on the dollar, Maybe try giving the original homeowner a break for once, they (the Taxpayers in case you forgot) bailed you out with TARP money! Maybe give them a chance to find a job so they can make their payments again. Refinance them at a lower rate and give them a year or so off their payments so they can find work, maybe a roommate to get back on track. Maybe there should be a 31 year mortgage available with a clause in the loan docs that at anytime within that 31 year period if for some reason you are out of work, sick from medical issues you have the right to take a year off your payments to get back on your feet and won't hurt your credit! Until we have a competent President that has a clue of budgeting and finance we will no doubt continue the decline of wealth in America. Home prices are on a 5 year decline and have not bottomed out yet regardless of what you hear in the news! And I have always been an advocate for homeownership but I no longer feel that way! Mr President why don't you work on creating jobs, making banks give more small business loans to create more jobs! You think selling home foreclosures to investors is going to help? Who's going to rent those homes? the unemployed? I guess it's easier to print money, let China, Brazil and other countries buy up our debt so we can become a third world country. $918 Billion to keep the Government running for the next 9 months....America needs to wake up before it's too late! We are sinking fast!

January 11, 2012 at 3:15 pm

So all these comments where does it get us?? What can we do?
Does anyone have an answer??

Phil Jones
January 11, 2012 at 3:02 pm

Although I didn't vote for Obama, I actually think this is one of his administration's better ideas. Currently there are so many foreclosed homes on the market that it's holding down the prices of new and existing homes. Once that backlog is cleared out, prices will rise again. And there certainly is a distinct need for more rental units.

Yes, I feel sympathy for those who have lost their homes due to the recession and massive layoffs, but that's cyclical and the economy will pick up eventually. Assuming a mortgage is always a gamble since you never know what the future holds for your income level. That's why it's so important to resist the urge to borrow against the equity in your home. It's also wise to begin with a lower cost starter home and work your way up the equity ladder to more expensive properties. I think too many Americans have lost sight of the basics of personal finance and have relied on their credit to buy expensive toys and vacations.

January 11, 2012 at 2:32 pm

I shopped to buy a home in 2006 & 2007 the prices were a joke. A $130K house for $225.9! And they were selling! I'm waiting for the 50% off sale. This ticks me off about bulk govt sales for rentals to keep the prices high for individual buyers still waiting for the price to get realistic.

January 11, 2012 at 2:31 pm

Anything this idiot in chief does will fail he has no idea what he is doing.

M Aysar
January 11, 2012 at 1:59 pm

I am not happy with the way people are treated when they
have a legal income and can't be qualified for their home
when it was quit-deed to them in a divorce settlement. Looking
at all the home that delinquent and nothing is being paid.
Here i am trying to work out something to stay in the home
and nothing is done about it. I think a program for this
situation should be generated. At least the bank will be getting

D Dillon
January 11, 2012 at 1:29 pm

After reading all the comments I think we should aall look at more than the housing. How about an Enron bailout with a slap on the wrist thatcost tax payers or all the wars and interventions that costs us billiions of dollars, or how about people that have been robbed of their retirement benefits from the companies that they worked for. The 45 billion given to the banks for bailouts was supposed to be used to loosen the credit and help small businesses and people get affordable loans but was never done so the banks got a free ride and made money from our taxes. Instead millions of jobs are gone making once affordable homes for peoople no longer possible. Unemployment is a laugh trying to live on it and have to pay taxes for it on a much reduced income. I lost my job 14 months ago and took 8 months for unemployment to finally pay me so all savings are depleted at 60 yrs old try to find a job. Something has to be done to balance the inequality in this country. Canidates that are running for office and I mean all of them are a joke they will change nothing Maybe it is time to actually give this country back to the people instead of the billionaires that seem to have us under thumb along with the government.I agree with the 99% if they would actually start a concrete platform instead of going in 100's of directions.