In an effort to clear out the glut of unsold properties in today’s real estate market and prevent home values from continuing their downward spiral, the Obama administration is considering pulling foreclosed properties owned by Fannie Mae and Freddie Mac off the market and renting them out[1]. This could, according to Credit Suisse analysts, ultimately help avert another 3-5 percent decline in home prices. Although this move would place the federal government in the somewhat controversial position of landlord to potentially thousands of tenants, the proposal to “trim the glut of unsold foreclosed homes on the market is worth looking at,” according to Federal Reserve chairman Ben Bernanke in testimony to Congress last week[2].
Given that national rent rates are on the rise, it will probably surprise no one that the cash-strapped federal government is considering getting involved in this aspect of real estate. However, another idea rumored to be on the table is that federal officials might sell the foreclosed properties to investors in bulk to rent out. Do you think either of these options will work?
Thank you for reading the Bryan Ellis Real Estate Letter!
Your comments and questions are welcomed below.
[1] http://realtormag.realtor.org/daily-news/2011/07/22/govt-in-talks-rent-out-foreclosures
[2] http://online.wsj.com/article/SB10001424053111904233404576458300001332210.html
Sounds like a real cluster. What about taxes owed to the towns and cities? I thought government buildings were exempt from taxes. Also, how many more federal czars and employees will it take to oversee this fiasco. This has to be a really bad idea. Thumbs down from me.
The government has no business in the real estate market period. We let this happen than we will all be living in what mining towns use to call “Company Housing”. No. No, No, No. Shut down Fannie Mae and Freddie Max.
This is ludricrous. Right now as we slide over the edge of the cliff, and our Law makers are in COMBAT…..stick to your friggin job…do your job….compromise if you have to get our country back on track, and stay the hell out of real estate.
Government does not belong screwing up, what has already been screwed up by our fraudalent Banking system. American’s deserve much better.
There Obama goes again showing his inexperience!
This blog no doubt has many real estate investors who understand this far better than our own President.
Renting out properties is a labor intensive an costly proposition. Anyone who has ever owned buy and hold residential real estate knows what an idiotic idea this is for the Government to consider. I know what it takes to manage real estate first hand, and for them to consider that this is a good idea shows me they do not understand what it takes.
What the administration should be doing is making it easier for investors and contractors to clean up the mess. Instead they are passing ridiculous legislation, and regulating those in the real estate industry out of business. The level of stupidity in Washington is mind boggling. This is what we get when you put a bunch of Lawyers in charge. However, technically it is “Change” and after it is all over, that is all we will have is “Change” but they will tax that as well.
Not only will they now rent them out but they with use taxpayer money to pay for the rent. This is simply one part of the big communist takeover of America, called the ONE WORLD ORDER. This was the plan from the beginning of the Dodd-Frank bill forcing banks to lend to people who could not afford to pay back the loans. It is a way for the Govt to get control of the real estate using taxpayer money.
I absolutely agree with Messers Adinolfi and Shaulis. They beat me to the punch: The Feds vdon’t belong in private biz. It’s not their place.
B’crats only muck up the works and end up costing the producers of this country add’l Billions in mgmt expenses never recouped by rents. When the tenents can’t / won’t pay, B’crats will find a reason to subsidize ‘em.
The ‘Private Sector’ needs to take over Fannie, Freddy and any other acronym-heavy gov’t org.- not the other way around.
It is bad idea. There are liabilies for landlords.
1. Utilities: Most of tenants do not pay water bill.
2. Maintainance: interior-appliance, borken toilet, sink, plumbing, etc…
eterior- leaking roof, gardening,etc…- there are citations
from City of yellow grass and not grooming certain
length of grass. City Building codes to be compliance.
3. Property tax
4. HOA fee
5. Eviction: tenants not paying rent
6. Insurance-
It is not easy to be a landlord, too many issues to take care of. There are potential cost for landlords.
Just sell the property, be a seller than a landlord.
I think they got this idea from realtyangels.com.
Might work if they do it right.
The government would be wise to let investors sort through their inventory and actually get these properties sold before they go into disrepair. They can then tax said investors and profit while the investors also make a profit. And while this may not seem like a good deal to the consumer… keep in mind that Real Estate prices have fallen exponentially since 2008 and will continue to do so for the next 5 years. By then, the proverbial “crap” has hit the fan and the government will be forced to “re-negotiate” current policy or initiate Marshal Law. Who knows which way this fiasco will move? Not I? Just food for thought.
Sell,Sell, Sell! The sole reason that the homes are vacant is that too much is being asked for them to sell! NOBODY in Goverment, be it Dem’s or Republicans, want to go back to Economics 101. As in,” What Caused the Great Depression of the 1030′s? Or, Economics 102,”What steps were taken to resolve that financial debacle and kept the US Economny on course for 75 years, through Rep’s and Demo’s administrations,Deficits and Surplus, War and Peace ( I’m sure we can find some years of serenity between 1930 and 2011!) And now that Wall Street has regained access to the US Residential Real Estate market, no one will talk about the damage that has resulted, except to blame “Brokers” for the debacle!
The government does not need to be getting involved in the real estate industry. Real estate professionals have the knowledge and the ambition to market these properties, both in sales or in the rental/management side of this industry. Why get more payroll for the government to spend when the resources are already in place in an industry that is hurting from the errors of the past few years. Let’s provide work for those who are already trained to get the job done! Besides, who would want to lease a home from the U.S. government!!
Homeownership is the American dream. When people own their home, they take better care of it than if they were renting it. Every new home spurs the economy on, not just the building trades, but the home improvement companies, furniture stores, lawn care services, decorator services — the list goes on and on. Home ownership helps the economy.
If, ten years ago, the government had made mortgage money available to the working poor to buy houses, at say 4.5%, millions of families would be in homes with stable values now. Instead, greedy bankers created those atrocious ARMS, where the interest rates (and therefore the payments) soared, and the working poor could not afford the payments and defaulted.
One way to get out of this mess would be to allow investors to buy the vacant houses, fix them up, and sell them to owner-occupants. The working poor cannot afford to buy a fixer upper because they cannot afford to make the repairs. Enen if the investor rents the renovated home out, it improves the economy.
Two things are hampering the efforts of investors right now. First, the banks have made it nearly impossible for investors to get loans. Secondly, those darn “seasoning” requirements make the investment unattractive. Investors are not the enemy! Over 54% of the homes sold last year were in distress.
My suggestion:
1) the government agencies should offer incentives to banks which do not require “seasoning” –lower rates on treasury notes or whatever. There is a precedent in the government transportation monies: require seat belt use or lose funds.
2) the government should temporarily make mortgage money available to investors at a reasonable rate, say 7%, until the banks step up and provide it. There could even be a clause where you have to prove that you have experience, to discourage “wannabe” investors from making unwise deals.
Just my two cents worth.
There should be no debate!
Sell all properties even at a loss, just to take it out from the Federal inventory. Let the tax payer absorb the initial loss but do not throw good money after bad money. Let the Real Estate people look for buyers. I am sure a substantial number of Real Estate people have still the ethics to do the job. Whether buyers are investors, foreigners, or whoever. The idea is to remove the properties out of the hands of the government.
Rental business is too problematic and government is too bureaucratic. Lets not have another entity which will turn out as another “Too Big to Fail”
No, No, NO, and NOOOOO!!!! I just bought an REO property from Freddie Mac. We closed 7/20. The occupant had been foreclosed on IN JANUARY, 2011. Freddie Mac let her STAY there, and we couldn’t even get in to LOOK at the property until a week after we spotted the listing. Then, there was no lock box. We put in a full price offer (cash) on 6/7, wanting to close (per Freddie Mac REO guidelines) in 15 days or less. Ah, but NO! Since the listing agent had to meet with the occupant to get the “cash for keys” doc signed, do you think she moved fast? HECK NO! She dawdled around until 6/19, so she wouldn’t have to vacate until 7/19. THEN, we scheduled appraisal and inspection, and she STOOD US UP! Then, when Freddie didn’t close on 7/11 as per THEIR CONTRACT, they said WE were out of contract? SAY WHAT!!!!! So this is what happens when the occupant stays–and our tax dollars go to subsidize a government sponsored fiasco! Unbelievable!
It’s yet another stretch to even further expand loving, omniscient (in their eyes) government and its dominion over the serfs. I can see it now…should only take another 30,000 or so bureaucrats to staff a new United States Landlording Administration (U.S.L.A. – or Useless to we serfs). Housing will be subsidized to provide homes for ACORN and other such miscreants, so they don’t have to worry about bills anymore and can focus all their energies on the massive election fraud campaign that will ensure Imam Obama’s re-election. The federal deficit will be further expanded, accellerating our economic demise. Problem solved. It just doesn’t get any better.
My Real estate broker did not compete with me for listings, why should my government. No No No!
Here we go again, another assinine government takeover. The free market capitalist system allows one to succeed beyond your wildest dreams if you have the intelligence and work ethic to succeed. It also allows you to fail miserably if you take bad risks and make foolish decisions. That is the price we pay for living in a free country. For the last 40 years government has been throwing money at all sorts of social programs yet more people are on food stamps now then ever before, our education system does not educate, and the general population has been dumbed down to the point where American history and civics are not even taught to kids anymore. Is it any wonder that everyone is shuffling their feet while the communist Obama dismantles the U.S. Obama is deliberately pursuing policies that will cause the economy to collapse thereby ushering in the socialist state that he envisions.
Government needs to get the heck out of the way and let the investors do their thing. They’ve been trying to make it impossible for investors to do lease/options or seller financing. The banks and the government caused the problems in the first place. If the banks had just worked with homeowners or even made it easier to do short sales, we wouldn’t be in this mess. UGH! Don’t get me started!
We don’t need competition from our own government. Those of us who are buying up foreclosure houses and renting them out are small entrepreneurs. We don’t need to be wiped out by government competition. They should help us by getting the banks to lend so we can buy more properties. Those same big banks we bailed out will not loan on investment houses I buy at 70 cents on the dollar. I have to go to small banks who see the value and even then, I need to put 20% down plus fix them up so the bank has 50% Loan To Value. Keep government out and make banks lend at 80% loan to value and the problem would go away overnight!
Agree with Daniel Cary above (Facebook comments). We do not need new “government housing” projects. The evolution from the projects to Section 8 housing vouchers reduced costs to government, and afforded dignity and choice to the beneficiary tenants in the free market. It works by keeping inept government managers’ hands off! Going back to the “projects” model is a huge mistake, born of well-intentioned, self-important lofty thinkers in nicely appointed Washington offices. Unfortunately, those offices are a breeding ground for collateral waste and misery.
Each of the millions of subject properties have their own rehab challenges, and so individual investors assess the properties and the local marketplace within their own rehab budgets and skill sets, thus allowing the free market to automatically pair the correct managers to each property.
There is a lot of cash currently sitting on the sidelines in this economy. A government takeover of distressed housing would squander one very important way in which that sideline cash has been coaxed out of storage and back into the economy.
David Jones’ plan above sounds good, but IMHO it mirrors the type of poorly assessed bundling of property portfolios that caused this mess, and will do little better once the true cost to rehab and adequately manage these bundled portfolios gets beyond the dreams of the bundlers’ huge commission checks.