Senate, House Bills Would Authorize GSEs to Rent REOs
February 16, 2012
A bill filed in the Senate last week would authorize Fannie Mae and Freddie Mac, as well as Federal Deposit Insurance Corporation-member banks, to enter into long-term leases to permit families to stay in their homes while also easing the pressure of unsold foreclosure inventory on the housing market.
The Home Act, S. 2080, sponsored by Sen. Dean Heller, R-NV, would afford banks and the GSEs the option of leasing their real-estate owned (REO) properties for up to five years, with the additional prospect of selling the house to the renter once the rental lease runs out.
“Homes left vacant and uncared for can quickly become an eyesore, pushing low home values even lower,” said Heller. “This legislation would help stabilize home prices, preserve our neighborhoods and allow families a chance to stay in their homes.”
The Home Act would also direct the Federal Housing Finance Agency to set standards for determining if a property is eligible for leasing, while the authority for arranging such REO leases would expire three years after enactment of the bill.
Earlier this month, the FHFA announced the first step of a REO Initiative targeted to “hardest-hit” metropolitan areas.
Previously announced in August, the FHFA’s Initiative allows investors to “pre –qualify” to establish eligibility on transactions in the initial pilot phase, as well as subsequent phases. The REO Initiative will allow qualified investors to purchase pools of foreclosed properties with the requirement to rent the purchased properties for a specified number of years.
“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,” the FHFA said.
The Finance Agency noted that pre-qualification will require those interested in receiving information regarding specific pilot transactions to meet certain minimum criteria including, but not limited to, (a) financial wherewithal to acquire the assets; (b) sufficient experience and knowledge in financial and business matters to analyze and bear the risks of the investment opportunity; and (c) agreement to keep certain information about the REO and related matters confidential.
The FHFA’s REO Initiative was developed in concert with Fannie and Freddie, as well as the FDIC, the Treasury Department, the Department of Housing and Urban Development and the Federal Reserve.
Heller’s newly introduced REO rental bill is a companion to a similar bill filled in the House last summer by Rep. Gary Miller, R-CA. H.R. 2636, the Neighborhood Preservation Act, would also sanction banks and the GSEs to rent out REO properties back to the foreclosed homeowner or to another individual.
H.R. 2636 enjoys bipartisan support with six co-sponsors, including House Financial Services Committee Chairman Spencer Bachus, R-AL, and Ranking Member Barney Frank, D-MA.
A previous version of Miller’s bill in the 111th Congress passed the House by voice vote but was never acted upon by the Senate. S. 2080 does not yet have co-sponsors but Heller has been actively soliciting bipartisan support for his legislation.
Look for more Fannie Mae, Freddie Mac and FHFA news in the next issue of Inside The GSEs on Friday, Feb. 24, 2012.
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