The Obama administration is looking for new ideas to shrink a glut of foreclosed properties held by mortgage finance giants Fannie Mae
The U.S. Treasury Department, the Federal Housing Finance Agency and the Department of Housing and Urban Development said on Wednesday they were considering alternatives including turning the foreclosed properties into rental homes.
It's critical that we support the process of repair and recovery in the housing market, Treasury Secretary Timothy Geithner said in a statement.
Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets, and support neighborhood and home price stability.
A request for information the administration is putting out doesn't endorse a particular long-term option to stabilize the housing market. Instead, it asks for input from those with private capital willing to work with the government on buying foreclosures and expanding access to rental properties.
The government is open to comments through September 15.
Obama administration officials said they were looking for private partners to remove as much as $30 billion in single-family real estate owned properties (REOs) that would be available for sale and are currently on the books of Fannie, Freddie, and the Federal Housing Administration.
REOs are properties owned by a lender, such as a bank or government agency, after an unsuccessful sale at a foreclosure auction.
Among possible investors, officials said they were looking for private-equity funds, financial institutions, and perhaps local governments and nonprofits to buy foreclosed properties and offer them as rentals in stressed housing markets.
Another approach the White House is eyeing would allow investors to partner with Fannie and Freddie in a joint venture to buy a pool of converted rental homes, with an equitable split between the government entities and investors to reduce losses at the mortgage giants, Fannie and Freddie.
Such partnerships with private-sector investors may reduce taxpayer losses said Edward DeMarco, acting director of the Federal Housing Finance Agency, in a statement.
Treasury and FHFA seized control of Fannie and Freddie almost three years ago amid fears the two were at risk of failing and so far they have cost taxpayers more than $140 billion. The government-sponsored enterprises, or GSEs, own or guarantee more than half of the almost $11 trillion in U.S. residential mortgage debt.
The administration said its mortgage-assistance programs aimed to help distressed borrowers will continue while it tests the waters for investors willing to buy pooled properties and rent them out.
(Reporting by Margaret Chadbourn, Editing by Andrea Ricci)