The housing crisis is large enough that it needs to be addressed in multiple ways. The government has sponsored the Home Affordable Refinance Program (HARP), the Home Affordable Modification Program (HAMP), updates to HARP and a plethora of other programs addressing various sections of the depressed housing market. Today, President Obama announced another set of proposals including one aimed specifically at reducing the nation’s massive foreclosure inventory.
The president announced the latest wave of proposals aimed at mitigating the ongoing impact of the housing bubble bust during a speech at the James Lee Community Center in Falls Church, Virginia.
During his speech, Obama acknowledged that participation in the existing programs was significantly less than desired and so his administration is continuing to find new approaches that will have a more noticeable impact on the housing market. The president specifically mentioned the millions of middle class families that have been significantly impacted by the recent economic recession.
One impediment to the housing market recovery is the vast inventory of foreclosed homes, many of which are not even listed for sale yet. President Obama’s proposal includes a measure that addresses this problem.
“The proposal includes a pilot program to sell foreclosed properties in bulk to investors who maintain the homes as rentals, according to the White House. The pilot will be limited to homes owned by Fannie Mae, the mortgage company under government conservatorship.” Source: Bloomberg Businessweek
The Bloomberg Businessweek article points to an announcement on the Federal Housing Finance Agency’s (FHFA) website inviting investors to pre-qualify for this program. The announcement also includes more details about the program.
“The REO Initiative will allow qualified investors to purchase pools of foreclosed properties with the requirement to rent the purchased properties for a specified number of years. This rental period could provide relief for local housing markets that continue to be depressed by the volume of foreclosed properties, and provide additional rental options to certain markets. Pre- qualification ensures investors will have the financial capacity and operational expertise to manage properties in a way that is conducive to the stabilization of communities hard hit by the housing downturn. “ Source: FHFA (PDF)
Although the FHFA announcement doesn’t specify which communities will participate in the program, I would assume that cities in Nevada, Florida, Arizona, Michigan and perhaps part of California would be high on the list of communities that need immediate support in alleviating the foreclosure inventory problem.