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?
Keep up with your wealth and mortgages and follow me on Twitter.
Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.