Administration: Convert Foreclosures to Affordable Rental Housing

On Aug. 10, the Obama administration announced that it's seeking input on a new initiative to stabilize neighborhoods by facilitating the disposition of single-family real estate-owned (REO) properties, including condominiums, from the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac and the Federal Housing Administration (FHA) and, through third-parties or joint ventures, using the properties to provide affordable rental housing.

The initiative will be in addition to the current GSE goal of marketing individual REO properties. The administration hopes to pool properties by geographic area and sell them to interested third parties to expand access to affordable rental housing, promote private investment, and support home price stability.

The GSEs and FHA currently own 248,000 single-family properties, which account for about half of all foreclosed-upon properties that are still awaiting resale. According to Barclays Capital, 830,000 homes backed by the GSEs are in the foreclosure process.

The administration is seeking comments on potential options from both industry stakeholders and market participants that are interested in engaging in large-scale transactions with the GSEs and/or FHA. The administration is particularly interested in potential strategies, transactions, and venture structures that include lease-to-own programs, ways for private owners of other REO properties to participate in the transactions, and support for affordable housing needs.

Organizations that would like to comment on the proposed initiative must submit their responses to REO.RFI@fhfa.gov by Sept. 15. Responses should include recommendations for REO purchase procedures and qualifications, ideas for uses for the properties, implementation steps and timelines, plans for maintaining and managing the new rental properties, and an analysis of economic, risk, and financial factors.