(Bloomberg News) The Federal Housing Finance Agency will begin inviting bids from investors to buy packages of foreclosed properties to be offered as rentals.
The agency today said it will send detailed information to investors who qualify to participate in the bulk-sales pilot program. About 2,500 foreclosure homes will be marketed in Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix and parts of Florida, according to a statement posted by the agency on its website today.
The program is limited to properties owned by Washington-based Fannie Mae, which sells and guarantees home loans. The subprime lending collapse left the company with more than 122,000 foreclosed homes, also known as real-estate-owned or REO, when loans that it guaranteed failed. Fannie Mae and its smaller rival, Freddie Mac, were taken under government conservatorship in 2008 amid mounting losses. Freddie Mac will not participate in the pilot programs.
Under the pilot program, the first large-scale bulk sales effort by FHFA, investors will agree to be equity partners with Fannie Mae.
"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 J. DeMarco said in a written statement.
The agency announced its intent to commence the program and invited investors to apply on Feb. 1. Credit Suisse is the financial advisor on the sale.
To participate, investors must show that they have the experience and financial capacity to purchase and manage the properties, the agency said. Once they qualify, they'll receive detailed information about the properties. To bid on the homes, qualified investors must post a security deposit and sign a confidentiality agreement to gain access to detailed information, according to the news release.
"It's a good first step," Oliver Chang, a Morgan Stanley analyst who has advocated for bulk sales of foreclosures as rentals, said in a telephone interview from San Francisco today. "We think the backlog of distressed homes is the biggest drag on a recovery."
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