White House Seeks Ways to Stem Glut of Foreclosures
August 10, 2011, 3:35 PM EDTBy Lorraine Woellert
(Updates with proposal guidelines in 13th paragraph.)
Aug. 10 (Bloomberg) -- The Obama administration, aiming to boost a housing market showing little sign of recovery from the 2008 credit crisis, is seeking ideas for renting, selling or disposing of foreclosed homes controlled by the government.
The Federal Housing Finance Agency, regulator of Fannie Mae and Freddie Mac, U.S. Treasury Department and the Department of Housing and Urban Development announced the solicitation in a statement today.
The agencies are seeking to shrink the pool of foreclosures and boost home prices by finding investors for properties owned by the Federal Housing Administration and U.S.-run Fannie Mae and Freddie Mac. Combined, FHA and the two companies own or guarantee about 90 percent of U.S. mortgages.
Selling or renting properties in blocks “may reduce taxpayer losses and meet the enterprises’ responsibility to bring stability and liquidity to housing markets,” FHFA Acting Director Edward J. DeMarco said in the statement.
President Barack Obama has struggled to right the housing market since he took office in January 2009, four months after losses stemming from defaults on subprime loans pushed Fannie Mae and Freddie Mac into government conservatorship.
Freddie Mac, of McLean, Virginia, and its larger rival, Washington-based Fannie Mae, have survived on government aid since they were seized in September 2008. Since then they have drawn almost $170 billion in Treasury aid to remain solvent.
Little to Show
As he prepares to seek re-election next year, critics say Obama has little to show for his efforts. The administration’s Home Affordable Modification Program has helped about 650,000 borrowers keep their homes, far short of the 3 million to 4 million it had targeted.
“In the 2008 campaign they said the president would come in and fix the housing problem,” said Keith Hennessey, who was director of the National Economic Council under President George W. Bush. “We literally couldn’t see a way that policy could solve the problem. I think they’ve figured that out now.”
With today’s announcement, the focus shifts from keeping borrowers in their homes to finding a future for the houses whose owners couldn’t be helped.
‘This Is Political’
“They have mishandled the foreclosure process, now they’re stuck with all these properties,” said Peter Morici, a professor at the University of Maryland’s Robert H. School of Business. “This is political, but there’s also a certain amount of necessity here.”
The announcement particularly seeks input from companies with “the technical and financial capability to engage in large-scale transactions.”
One challenge is to find economies of scale for disposing of housing inventory scattered across the country. That might include auctioning houses in bulk to investors, finding firms to partner with Fannie Mae and Freddie Mac in managing rentals, or even demolition, according to the announcement.
Proposals should be tailored to a region’s economic conditions and involve pools of property worth between $50 million and up to $1 billion, the agencies said.
As of the end of June, Freddie Mac held nearly 60,600 foreclosed single-family homes, known as real-estate owned or REO. Fannie Mae reported more than 135,700.
“We anticipate that it will take years before our REO inventory is reduced to pre-2008 levels,” Fannie Mae said in its earnings report on Aug. 5.
Comments are due to the agencies by Sept. 15.
--With assistance from Julianna Goldman and Roger Runningen in Washington. Editors: Gregory Mott, Maura Reynolds
To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net
