2500 Government Foreclosures up for sale, in bulk

by 28 Feb 2012

Barely six hours after billionaire investor Warren Buffett said that if he could he’d like to buy “a couple of hundred thousand single family homes”, the regulator of Fannie Mae and Freddie Mac put about 2500 of theirs up for sale.

It is the next step in the government’s REO (bank-owned) to rent program; the plan, announced earlier this month, is designed to help Fannie and Freddie unload thousands of foreclosed properties weighing on their books. Fannie Mae alone owns more than 100,000 repossessed properties.

“This is another important milestone in our initiative designed to reduce taxpayer losses, stabilize neighborhoods and home values, shift to more private management of properties, and reduce the supply of REO properties in the marketplace,” said FHFA acting director Edward DeMarco in a press release.

While the prequalification phase began several weeks ago, investors can now move to the next phase, where, if accepted by proving financial capacity and experience, they can get access to the properties for sale. The bulk of the properties are in the most distressed markets, such as Florida, parts of California, Phoenix, AZ, and Las Vegas, NV. Atlanta, GA, however, has the highest number in the mix, 572 properties making up 23 percent of the total up for sale. Atlanta housing was hit hard by the recession and high job losses. Just 17 percent of the properties are vacant, so investors would largely be getting assets with existing cash flow.

As these first properties hit the market, there is no shortage of investors ready to scoop them up. Rental demand is still surging, and rents continue to rise, despite record high affordability and record low mortgage rates. Nearly 47 percent of all closings in January were of distressed properties, according to a new survey from Campbell/Inside Mortgage Finance, and investors now make up nearly a quarter of all buyers, according to the National Association of Realtors.

As banks start to ramp up the foreclosure process again, after a year of delays following the “robo-signing” scandal, more properties will be repossessed and put up for sale; investors are flocking to the deals, largely using all cash, as they get into increasingly competitive situations. Even owner-occupants (non-investors) are turning more to cash, as credit is still tight.

“Despite near record low mortgage rates, homebuyers are finding it very advantageous in the current housing market to shop with cash. And low returns on money deposited in banks as well as mortgage approval hassles also are pushing homebuyers to consider all cash transactions,” according to Campbell/IMF. “Between last October and January, the use of cash by current homeowners purchasing a new principal residence surged from 30.8 percent to 34.1 percent.

Critics of the bulk REO to rent program say that giving large investors with hoards of cash bulk deals squeezes out smaller investors who might do more improvements to the properties and then turn around and sell them at higher prices, thereby increasing overall home values. Investors in the FHFA program are required to hold the properties and rent them for “a specified number of years,” according to the agency’s initial announcement.

Read more: http://www.cnbc.com/id/46545642#ixzz1ngcAWayO


  • by Erfan | 11/29/2012 8:10:59 PM

    Mortage possession costs are a bit of an uuaunsl area. If you read your mortgage terms and conditions, you will (almost inevitably) find a clause entitling the mortgage company to add any legal costs to your account. Most now say that the costs have to be reasonable, but not all!So, the starting point in mortgage possession cases is that the lender has a contractual right to their costs. That being so, (a) there needs to be a good reason for the court to depart from that position (see the case of Gomba Holdings) and (b) this is why mortgage companies don't ask for costs orders at the end of the hearing. They don't need one.You'll immediately appreciate the potential unfairness here. The hearing gets adjourned because, say, the mortgage company cannot show that the "letter to occupiers" was sent. The mortgage company are at fault, but the borrower still pays the costs of the hearing.The court does have a power to prevent the lender from adding their costs to the mortgage and can, of course, order the lender to pay costs, but, unless you raise it with the DJ, it is pretty unlikely that they'll do anything off their own bat.The lender can also apply for an account to be taken in respect of the costs, but, again, this is fairly rareThe UTCCR argument is usually applied so as to attempt to strike the costs clause from the contract. If you've got access to the Journal of Housing Law then there is a very good article about this in the 2005 edition.


Is TILA-RESPA a good or bad thing long term?