According to Radar Logic, the federal government is currently holding about 46 percent of the entire body of REO properties in the country. This includes properties held by Fannie Mae, Freddie Mac, HUD and VA loans. The company also predicts that due to a glut of “non-performing” homes that are not yet in foreclosure but clearly headed that way, the stake that the federal government has in the housing market is only going to go up for a predicted total of 3.1 million homes ultimately in the federal government’s possession.
While this massive property backlog is of concern no matter how you view our current administration or government in general, it is particularly disconcerting since these homes are marketed and maintained through the use of taxpayer dollars. The same analytics company predicts that the book value of the homes in question could reach $614 billion, which is particularly troubling when you factor in that the government, just like most other sellers today, will end up selling REO inventory at a loss. Factor in the average discount today (40% below book price) and that is a loss of $246 billion before you even factor in the properties that are discounted before they reach foreclosure status via short sales.
It seems like these massive property holdings could hold the key to the survival or the downfall of the housing market. What do you think the government should do with this plethora of distressed property?
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