Housing regulator starts program to sell off foreclosed houses

A federal housing regulator announced Monday that it will start selling foreclosed homes to investors in areas hit hardest by the housing crisis to provide stability to the ailing sector and boost the economic recovery. 

The Federal Housing Finance Agency (FHFA) said it is seeking investors for the Real Estate-Owned (REO) initiative in Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix and parts of Florida as part of the first-phase of the process to find suitable buyers to purchase housing and related assets and then rent 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,” FHFA Acting Director Edward DeMarco said in a statement. 

In this phase, pre-qualified investors can submit applications to detail their finances, experience and specific plans for purchasing pools of Fannie Mae foreclosed properties with the requirement that they rent the purchased properties for a specified number of years. Potential investors are expected to undergo a rigorous process to qualify for the program, FHFA said. 

“We believe that this initiative holds promise for providing support to local neighborhoods that were especially hard hit by the housing crisis and will help meet the rising demand for rental housing in many communities,” said Michael Stegman, counselor to the secretary of the Treasury for Housing Finance Policy.

FHFA announced plans in early February to start the REO program, following a few years of discussion on the issue, which has backing on Capitol Hill from Sen. Jack Reed (D-R.I.) among other lawmakers. 

"This is a smart way to get private capital back into the game and help pull the economy out of the housing downturn," Reed said recently.