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Banks and government agencies face several problems with their plans to rent out their backlog of foreclosed homes, especially if they try to securitize those rentals, according to Morningstar Credit Ratings.
June 27
WASHINGTON — The Federal Housing Finance Agency provided an update Tuesday to its pilot program designed to turn foreclosed properties into rental homes, saying it had determined the first round of winning bidders.
The transactions are expected to close early in the third quarter, at which point the names of the bidders will be disclosed.
"FHFA undertook this initiative to help stabilize communities and home values in areas hard-hit by the foreclosure crisis," said Acting FHFA Director Ed DeMarco in a press release. "We believe this pilot program will assist us in achieving our objectives and help to maximize the benefit to taxpayers. We are pleased with the response from the market and look forward to closing transactions in the near future."
The FHFA launched a Fannie Mae test program in February, which involves the bulk sale of 2,500 properties located in Chicago and other areas.
The agency said investors were qualified to bid after a "rigorous evaluation process" based on several factors, including financial strength, asset management experience, property management expertise and experience in the geographic area.
Bankers and investors have been anxiously watching to see the success of FHFA's program, which was developed along with the Treasury Department and Department of Housing and Urban Development.
Banks holding thousands of delinquent mortgages are trying their luck renting properties to previous homeowners, then securitizing the pool of single-family rentals and selling them off. Bond investors, meanwhile, are more likely to buy vacant distressed properties in bulk, fix them up and find new renters to fill them.
But analysts have raised questions about how the rental-based securitizations will be structured and whether there is much appetite for them.
