Wall St. Looking to Turn a Profit Renting Out Foreclosed Homes

A growing list of Wall st. investors are looking forward to making large profits on the renting out of foreclosed homes, now that the U.S. government is moving ahead with a trial project to sell big pools of single-family homes that Fannie Mae currently own in some of the hardest-hit housing markets.

Critics of the program point out the obvious wealth transfer the federal government is pushing by selling big pools of foreclosed homes to big fund investors, while some of the very individuals who had their hands in creating the housing crisis will now benefit by buying foreclosed homes at a steep discount.

Fannie and Freddie Mac own more than 200,000 foreclosed homes. The nation’s banks own more than 600,000 single-family homes.

“This is really a test and we don’t know what the results will be,” says Meg Burns, senior associate director for housing and regulatory policy for the FHFA. “But the beauty of this pilot is we are going out with properties that are largely rented already, so people know what the cash flows look like and we know it is far preferable to have people living in the homes rather than the properties sitting vacant.”

In August, when the FHFA first announced its intention to conduct bulk sales for Fannie and Freddie properties, it received expressions of interest from more than 4,000 investor groups, not-for-profits and other organizations.

If the pilot is successful, the FHFA is also considering selling off pools of distressed mortgages held by Fannie and Freddie.

Rick Sharga, an executive vice president with Carrington, says that if the Fannie auction attracts a lot of bidders, then banks will begin holding their own bulk sales of foreclosed homes.

Some liberal economists are questioning the practice of the federal government selling homes institutional investors at a potential 20-30 percent discount to prevailing market price.

“This is actually moving the underlying physical assets, or homes, to the top 1 percent,” says L. Randall Wray, a professor of economics at the University of Missouri-Kansas City and a senior scholar with Bard College’s Levy Economics Institute.

Advertisements

Leave a comment

No comments yet.

Comments RSS TrackBack Identifier URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s