When the economy started to show significant strains in the middle of last year, Senator Obama spoke of the need to stem foreclosures in an attempt to help a struggling housing market that was feeling their effects in slower sales and lower prices. Now, one week in, President Obama followed through on that point by including foreclosure prevention as one of the elements in the stimulus package. Barring any extreme opinions, most people will agree that the flow of foreclosures needs to be prevented where possible and measures should be taken to help people stay in their homes.

But there is another angle to this issue. No matter how effective these foreclosure prevention efforts might prove to be, the cold truth is that there will still be foreclosures. Some loans will not be able to be modified. Some borrowers won’t be able to afford even modified payments. And some others will lose their ability along with their employment. How do we stop the negative effects that these foreclosures will have on the housing market going forward?

In September of last year, new Fannie Mae investment property guidelines were announced, that were counterproductive to say the least. According to these guidelines, real estate investors will now be restricted to a total number of four investment properties that they can own at the same time (down from ten). The “logic” being that since the government bailed out Fannie and Freddie last year, they were now tightening their belts.

To the point of suffocation.

In a time when many housing markets are suffering from bloated inventories filled with bank owned foreclosures, the worst thing you can do is cut the legs of the very people that can help stabilize the situation. Serious investors have the ability to remove the foreclosure inventory from the market, bring the properties in top condition, allow housing prices room to breathe and provide rental housing for families displaced by foreclosure.

Mr. President, investors can help if given the opportunity - an opportunity which costs nothing! While we continue efforts to stem the flow of foreclosures, we ought to do the following to alleviate the housing markets across the country:

1. Lift the property limit for investment loans back to ten per investor.
   
2. Institute a “no-flip-for-a-year” rule to ensure that properties don’t get immediately resold.
   
3. Only make fully documented investment loans
   
4. Make sure investors have some “skin in the game” by requiring 25%+ Equity in the property

If these steps are taken, the housing market and therefore the overall economy is sure to recover faster.

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