Foreclosure solutions offered by the Feds

There’s a new federal program designated to take care of all those foreclosed homes scattered across the U.S.

The Federal Housing Finance Agency (FHFA) has explored and announced the first step of a Real Estate Owned (REO) Initiative. The idea behind the REO initiative is to restore livelihood in U.S. metro cities that have been hit hardest by the foreclosure crisis.

Investors in the program (those who qualify) can purchase “pools of foreclosed properties with the requirement to rent the purchased properties for a number of years,” FHFA announced Wednesday.

The FHFA REO initiative revives the American suburban dream and, if it is a viable program, will transform the rental market from the typical slew of apartment communities into rental housing neighborhoods.

In the current market, homeowners and first time buyers are happy. Prices and interest rates are low and it’s a great time to purchase a home. But a disconcerting number of Americans who want to purchase homes or sell their homes for an upgrade are running into credit barriers. The working American with average credit or poor credit scores is more likely to qualify for a rental property than mortgage loan.

A rental community/property has been lauded by those economic analysts who believe the market is too risky to make large purchases. Because the foreclosure crisis hit so hard in so many areas across the nation, property values in distressed neighborhoods dropped when homeowners succumbed to financial hardship.

The feds are, in a sense, courting investors to help restore and boost those neighborhoods and economies strangled by the depression that resulted in the nation' s historic foreclosure crisis.

FHFA announced yesterday as well that Freddie Mac and FHA (Federal Housing Administration) are expected to launch similar investor programs. Currently, the REO Initiative seeks investors to recover Fannie Mae owned properties. 55,000 Fannie Mae properties were on Fannie Mae’s foreclosure list in December 2011 (WSJ).

Combined Freddie Mac and Fannie Mae had 182,212 foreclosed properties in Sept 2011. (cnbc). CNBC also defines the REO Initiative as a “bulk sale program.”

Although the Obama Administration has, via legal ease and tax incentives, pandered to business owners in hopes of stirring up the economy, business owners (potential employers) have been slow to respond. New businesses have been slow to enter into the new economy because acquiring loans remains difficult for small business owners and small start-ups (bad credit). Investors in the REO must prequalify.

Colorado and Georgia list highest home foreclosures in April 2011

2010 Top Ten Foreclosures

The REO Initiative was developed in conjunction with the Treasury Department, Department of Housing and Urban Development, Federal Deposit Insurance Corporation, Federal Reserve, Fannie Mae and Freddie Mac. The Initiative was informed by meetings with stakeholders and review of more than 4,000 responses to a Request for Information (RFI) seeking input on options for selling single-family REO properties held by Fannie Mae, Freddie Mac, and the Federal Housing Administration

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