Feds Announce Program To Turn Foreclosures Into Rentals

In an effort to put living, paying bodies into homes left vacant following foreclosure, the Federal Housing Finance Agency has announced the beginnings of a program to sell off pools of foreclosed properties to investors who would then rent them out.

The initiative is aimed at the areas hit hardest by foreclosures, where entire blocks go unoccupied because the bank can’t find a buyer.

FHFA is now allowing interested investors to pre-qualify for the program. Eventually, they will be able to invest in pools of foreclosed properties, so long as they agree to rent those homes for a specified number of years.

Explains the agency:

This rental period could provide relief for local housing markets that continue to be depressed by the volume of foreclosed properties, and provide additional rental options to certain markets. Pre-qualification ensures investors will have the financial capacity and operational expertise to manage properties in a way that is conducive to the stabilization of communities hard hit by the housing downturn.

“This is an important step toward increasing private investment in foreclosed properties to maximize value and stabilize communities,” said FHFA Acting Director Edward J. DeMarco. “I am grateful for the collaborative effort by the many stakeholders including investors, nonprofit organizations, and state and local government officials, who have worked together on this Initiative.”

If you’re interested in investing in the pool, you can register at FHFA.gov.

Comments

Edit Your Comment

  1. Snowblind says:

    What could possibly go wrong?

    • clippy2.0 says:

      theres no mention of preset rental rates is there? I welcome our soon to be rental housing burst!

      mmm, 1600 a month living outside of boston. 1 bedroom, 600 sq ft. suck it NYC!

  2. EccentricJeff says:

    Helping the rich become richer. My tax dollars not at work. Thanks for less than nothing jerks!

  3. Onesnap says:

    Interesting idea. I know someone who is trying to sell their home in VEGAS. You know, one of the areas hardest hit with foreclosures. They are jobless and getting out of there. If there was a program to rent out the home that would help this young person not be in a tough spot.

  4. Cat says:

    I smell another giveaway for corporations or the wealthy.

    “(d) The undersigned is a natural person whose individual net worth, or joint net worth with that person‚Äôs spouse exceeds $1,000,000.”

    http://d13elqjcd61okc.cloudfront.net/content/pdf/Pre-Qualification_Request.pdf

    Short version: “Average Joes need not apply.”

    • ARP says:

      Yeah, but you need someone with enough money to buy a sufficient number properties to run. You also want them to be financially stable. So, I sort of get the reason behind the requirement. However, I don’t like the idea of making the rich, richer. It would be easier just to allow people to write off some of the loss on their homes. And yes, I’m one of those people who didn’t buy too much house and pays my bills on time. It pisses me off that some people get “free” money, but I get that it could help the larger economy and benefit me in the long run, if administered properly.

      • Cat says:

        I would think that a program targeting small investors – enabling mom and pop to purchase a few properties – would produce better results. Wholesale lots of houses going to investors is just asking for neighborhoods to become uncared for slums. There’s a certain pride of ownership that a “mom and pop” setup has that the Megaslumlord Corporation doesn’t.

    • Nobby says:

      “A natural person” as opposed to what? An unnatural person?

    • areaman says:

      What’s this? Trickle up again!!!

    • Cerne says:

      A $1,000,000 net worth is that high at all. And considering that investors in this program need to buy and maintain homes some form of financial threshold is necessary. Many foreclosed homes are in terrible repair and will need serious renovations to make them liveable.

    • AustinTXProgrammer says:

      This probably has to do with securities laws. They are forming an investment vehicle and if they allowed “non accredited” investors in they would open them up to the reporting requirements of a publicly traded company.

      These laws are intended to protect us average folks from scams, but it also locks us out of a chance to make lots of money.

  5. EnergyStarr says:

    i’m sure the investors will care deeply about maintaining the properties. i look forward to my home’s value steadily increasing as a result.

  6. MedicallyNeedy says:

    Learn Chinese for future tenant-landlord disputes!

  7. Oranges w/ Cheese says:

    Woot! Welcome Future Slumlords!

  8. exconsumer says:

    Hmmm . . . I’m glad that people would have more of a chance at affordable housing, but I don’t think I like the idea of turning an owner, who will eventually have an asset to sell (the house ideally) into a renter, who won’t accumulate any wealth. Seems a little depowering to the lower classes. If an underwater mortgage can be turned into an affordable rent, then I think I’d rather see a renegotiation of the loan and the original owner keep the house.

    • Tiercelet says:

      Seems a little depowering to the lower classes.
      You must be new here. Welcome to America, that’s how we do business.

      (I’m assuming by “lower classes” you mean “everyone who isn’t rich enough to be on a first-name basis with at least three members of state or federal government”)

  9. Tyanna says:

    I can almost see the slumlords lining up for such an opportunity.

  10. 10,000 Hours says:

    “If you’re interested in investing in the pool, you can register at FHFA.gov.”

    Pre-qualification Requirements:
    (a) The undersigned is a corporation, partnership, limited liability company, business trust or organization…
    (b) The undersigned is a/an: bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the ‚ÄúSecurities Act‚Äù)), savings and loan association or other institution…
    (c) The undersigned is a trust with total assets in excess of $5,000,000…
    (d) The undersigned is a natural person whose individual net worth, or joint net worth with that person’s spouse exceeds $1,000,000.
    (e) The undersigned is a business entity all of whose equity owners meet the crite-ria on one of clauses (a) through (d) above.
    (f) The undersigned is a natural person who has an individual net income in ex-cess of $200,000 in each of the two most recent years, or who has joint net in-come with such person‚Äôs spouse in excess of $300,000…

    Sounds like you need to be either one of those EEEEEEVIL 1-percenters or another ‘hated-by-Consumerist-readers’ organization to get in on this.

  11. misterfweem says:

    Y’all sound surprised that there’s a government program out there meant to help the poor and middle class but ends up not really helping them all that much. Are you sure you’re familiar with life in the US of A?

  12. HomerSimpson says:

    I welcome being screwed over by our new-and-improved corporate overlords

  13. Mike says:

    Oh man, what a terrible idea. The requirements to be considered are ridiculous, this is nothing short than a transference of wealth to the richest people.

  14. anker says:

    This is a horrible idea and will do nothing to stabilize communities.
    Our neighborhood associations have formed a team and we are working with city hall right now to fight this exact thing.
    The landlords will buy for cheap, rent to horrible tenants and never follow up with repairs or problems, leaving it for the city and police to deal with. The city does not have the manpower to deal with absentee landlords so the problems escalate until there are murders, gangs and drugs being sold openly on the streets.
    Another problem is the amount of people that move into a rental unit. It is designed for one family and they have four times the number of people in there, plus the animals. A few months ago while doing a dangerous dog check our S.C.E.N.I.C unit came across not one alligator, but five in a home smack dab in the middle of the city.
    This is another way for the government to try to make us believe they know what is best while making the wrong people rich.

    • lettucefactory says:

      Yup yup yup. State and local governments have been *eviscerated* since 2006, but they will be the ones managing the burden when shit doesn’t work out.

  15. SPOON - now with Forkin attitude says:

    I just read the requirements. Obviously I am not their target investor.

  16. Jaxtrax says:

    So basicly the banks and corporations that offered and supported the high risk ARMs that were designed to create forclosures on unsuspecting good people, are now going to be allowed to make more money off of said criminal forclosures? Yep sounds like the master plan is right on track then.

    I can’t wait till these cooperate slumlords come in and further devalue the property values in my neighborhood. So now even though I played it smart and got a proper loan on my house and pay my mortgage on time each month, I now also get to suffer at the hands of these criminal coperations.

    I hope karma does exist and this tyranny stops at some point.

  17. centurion says:

    Vote republican.

  18. SoCalGNX says:

    Thanks for giving away our homes to big business.

  19. BurtReynolds says:

    Great. Lets use tax dollars to help rich guys buy more property.

    Then those rich guys will be absentee landlords in your neighborhood. Profiting while the house they own on your street evolves into a dump.

    Now that your property value is lower thanks to the dump rental property down the street, you can now eat a loss on your house.

    Sounds like a win-win for us middle class folks.

  20. Bsamm09 says:

    See Regulation D Rule 501 and you will see the criteria for an “Accredited Investor”.

    http://www.sec.gov/answers/accred.htm

    • Lyn Torden says:

      You need to be that rich to pay $15k for a piece of junk foreclosed scrap heap that you will rent out for whatever you can get without doing any repairs to the property.

  21. Such an Interesting Monster says:

    Great, just what these area needs are slumlords to come in and take over. Bravo Feds! Way to completely fuck things up even more than they already are.

    Instead of handouts to investors maybe you should be giving them to people to prevent foreclosures in the first place. Or even to help those who have lost their homes find a way back into home ownership instead of a slumlord rental. Nah… cause that would make too much sense.

  22. Cerne says:

    This is a surprisingly good idea of a program. Homes get sold off to people and organizations with the money and expertise to manage them, more rental properties means more competition and lower rents and finally neighbourhoods slowly start getting rebuilt.

  23. Cerne says:

    This is a surprisingly good idea of a program. Homes get sold off to people and organizations with the money and expertise to manage them, more rental properties means more competition and lower rents and finally neighbourhoods slowly start getting rebuilt.

  24. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    Let me get this straight – homebuyer can’t pay mortgage, goes through foreclosure gets thrown out of house. Wealthy person or group of people buy house and rent it out to someone else. Former homebuyer can’t afford rent, so either leaves the area, becomes homeless, or goes to public housing.

    I’m just a dumb rural person from flyover country, but it seems like it would make more sense to allow people to refinance their mortages so they can pay what they can afford, and let them stay in their homes.

  25. psm321 says:

    Yay more giveaways to the wealthy!

  26. Yacko says:

    Most of the potential renters are tenants from foreclosed multi-family properties and former single family homeowners themselves. Where are they now? Already renting. Many are in a ton of illegal apartments in basements and attics or kneewalled 2nd and 3rd floors. And they are already renting cheaper, much cheaper than some government aided investor can rent to them. Owners who had stable finances were smart and already sopped up a lot of the rental pool by renting legally compromised portions of their properties.It’s a gold rush at $400 a month.

  27. Matthew PK says:

    Why is a “plan” required?
    When asset prices decline, properties are foreclosed… the owner will sell the property and likely either somebody will live there or rent it…

    The reason this *isn’t* happening is because there is a circumstance where some of these assets are not marked-to-market and nobody is scrutinizing the FHFA balance sheets.

  28. xanxer says:

    I’m going to write my Congressman and oppose this. This is NO motivation for banks to help under water home owners. This sounds like a huge SCAM.

  29. pot_roast says:

    Oh boy! More “investors” (read: already wealthy) getting into the market. That’s what caused some of the problem in the first place.

    Way to go, government.

  30. DerangedKitsune says:

    It’s an interesting idea, but I agree it seems to open the market to a lot of people becoming slum lords. I can see people/businesses buying up a ton of properties, renting them as long as they’ll hold together, and then dumping the properties back on the municipalities at the end of their rental period “contact”.

    There has to be something to keep those doing this in line and not allowing the properties to degenerate towards the end. We’ve all seen the horror stories about the vengeful tennant that trashes an appartment upon moving out. What’s to stop these companies from evicting all tennants, stripping the homes of salvageable materials (ie copper pipes and wiring), and dumping the empty shells at the end of an agreement?

  31. thomwithanh says:

    Are we talking about houses that are already vacant, or are these houses currently in foreclosure?

  32. Renaldow says:

    Federally subsidized housing aka Federalized housing. Houses taken from citizens and administered by the government. Who else did this? The Nazis.

  33. beaverfan says:

    So basically:

    1. Someone buys a house but can’t make their mortgage payment.
    2. Banks won’t accept lower payment and kicks out the buyer.
    3. Banks then rent house to someone else for lower payment.