As many of you know, Fannie Mae and Freddie Mac have embarked on a national initiative to turn the foreclosed homes and condos they own into rental properties. The idea is to attract investors to purchase or merely rehab the homes and offer them for rent in this robust rental market. The two entities own about 240,000 homes!
The RFI issued in September generated 4,000 responses, and FHFA (Fannie and Freddie regulator) recently announced a pilot program. The investor will purchase homes, rehab them and offer them as rentals in certain locales. If the pilot is successful, most observers predict the program will be rolled out across the nation. The Federal Reserve just last week chimed in and blessed the idea as acceptable management of REOs (bank-owned homes).
Since rental occupancy is high and rents are increasing, the entry of the Fan and Fred homes should help the supply/demand situation. A rehabbed, rented home is a better influence on a neighborhood or local market than an empty, perhaps boarded-up home. The taxpayer investment in Fan and Fred ($150 billion) may perhaps realize a payoff (of sorts) if the intiative works - especially since younger folks seem more inclined to rent, less interested in buying. And, if home value appreciation continues to be slow, at least cash flow from a tenant creates value for the investor, for Fan & Fred and, presumably, for lenders who take a similar approach with their own REO homes.
There are about 600,000 such homes on lenders' balance sheets, and another 700,000 currently in foreclosure. We're not out of the woods yet, but maybe this effort will ease some of the gravity weighing on the housing market.
