In September of this year, there were roughly 800,000 homes that had been repossessed and still in inventory. Of those 800,000, approximately a quarter million were inventory for the federal goverment due to government backed mortgages through Fannie Mae or Freddie Mac.
Said another way, 31% of Real Estate Owned (REO) properties were actually owned by US taxpayers. To me, this is an alarming number.
However, maybe even more alarming is the fact that the federal government issued a plea to you, yes you, to come up with a solution for handling and unloading the properties. Possibly you saw the request, possibly you didn't.
See below:
Request for Information:
Enterprise/FHA REO Asset Disposition
The Federal Housing Finance Agency (FHFA), in consultation with the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development, is issuing this Request for Information (RFI) to solicit ideas for sales, joint ventures, or other strategies to augment and enhance Real Estate-Owned (REO) asset disposition programs of Fannie Mae and Freddie Mac (the Enterprises) and the Federal Housing Administration (FHA). The agencies are exploring alternatives that will facilitate the current and future disposition of REO, improve loss recoveries compared to individual retail REO sales, help stabilize neighborhoods and local home values, and where feasible and appropriate, improve the supply of rental housing.
Not sure about you, but I applaud the federal government for seeking feedback and suggestions. And at the same time, this doesn't instill a lot of confidence. While certain private sectors may be more capable of dealing with such a strategy, certainly no one has any experience with the magnitude of a problem.
The biggest issue in unloading the properties is that it cannot all be done at once. Economics 101 tells you that if supply is up, price goes down. Hence, opening the flood gates and letting the properties be expelled at once actually drives down the price. This certainly would not bolster the market sector much less provide an immediate boost to the economy. However, if they are slowly released, the burden also rests on the taxpayer.
So, depending on how, what, where, when, why and who.....who do you think pays for the maintenance of the vacant homes, taxes, etc. Good guess, likely you and I do.
So, it remains to be seen, but the options at the moment are not glamorous.
Well, I wonder if they would be wililng forgive your government-backed debt in exchange for procuring a solution?
Michael Hobbs, PahRoo Appraisal & Consultancy
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