Foreclosure Rental Program Comes Under Fire, NAR States Disapproval

by 23 Feb 2012
 (TheNicheReport.com)  A U.S. government plan to get rental proceeds out of unfortunate foreclosures has come under heavy criticism by the National Association of Realtors (NAR), a professional association and powerful lobbying group. The disapproval stems from an invitation extended by government agencies to private investors to look at foreclosed homes in several states that could be transformed into rental properties.

Along with the Federal Housing Administration (FHA), government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac are now the reluctant owners of thousands of foreclosed properties across the country. Many of these properties are located in some of the hardest-hit regions of the country in terms of foreclosures: Atlanta, Las Vegas, Los Angeles, Phoenix, and South Florida. Fannie Mae had already taken the initiative of renting out some of the properties listed on the bid proposal.

The criticism lodged against the government's rental plans is based upon recent reports of real estate activity that show the increased interest of home buyers in foreclosed properties. The NAR's position in the matter is that allowing the FHA and the GSEs to offload the properties to private investors would only succeed in taking them off the market.

Opinions are mixed on the subject of renting out foreclosures. At a time when it is actually cheaper to buy than rent thanks to depreciated home values and record-low mortgage interest rates, groups like the NAR are hoping for a housing bonanza to take place, and properties tied into lease agreements are not that attractive to them.

The opposing view is that if too many foreclosed properties come into the market at once, this would only push property values down even further. Under this assumption, it would make more sense to draw income from these leased homes and effectively suspend their listings for a year or two as the market improves.

COMMENTS

  • by Barb Hassan | 2/24/2012 3:20:19 AM

    It makes perfectly good business sense for FHA, Freddie and Fannie to rent out properties that would otherwise be sold at foreclosure. The rental market is hot right now and why would these government sponsored enterprises not want to take advantage of rental income that is oftentimes higher than the mortgage payments that they currently are not getting on these foreclosed properties. At some point down the road those renters could possibly be the future buyers of these homes and that also would be great news for FHA, Fannie and Freddie. Of course this is not good news for NAR members as Realtors probably would be kept out of these transactions.

Poll

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