The housing crisis has been devastating for those who’ve lost homes or
struggled to hold on, but troubled times have also opened a door of
opportunity for investors – large and small – poised to cash in.
The Federal Housing Finance Administration (FHFA) recently propped open that
door of opportunity when it issued investors a pre-qualifying application
for an everything-must-go sale to unload of an estimated 200,000 Fannie Mae-
and Freddie Mac-owned homes.
For many it’s an opportunity of a life time.
Home prices are just about at rock bottom, interest rates are at record lows
and federal home loan agencies are awash in properties that are weighing
down their bottom line.
Targeting hardest hit metropolitan areas, FHFA’s “Real Estate Owned (REO)
Initiative (ROI)” allows qualified investors to purchase pools of foreclosed
properties, provided they convert them to rentals or facilitate flips to
owner-occupiers.
Fannie’s and Freddie’s overseer would like to get some of the properties to
individual homeowners and small investors and wants to see programs
developed as rentals for previous homeowners or for current renters to
become owners under lease-to-own deals.
“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.
On a macro level, the plan is also designed to shrink inventories of
distressed properties that are depressing home prices overall, foster large
scale rehabilitation efforts, and provide affordable housing for markets
most in need.
In the end, FHFA hopes the close out housing sale will play a role in
stabilizing hard-hit communities were foreclosures represent as much as 50
percent of the housing inventory.
The prequalification period is designed to weed out investors who don’t have
the financial wherewithal or the operational expertise to manage properties
as prescribed by the program.
FHFA has not yet announced an end date for the pre-qualification process it
opened Feb. 1, 2012 nor a date for the first sales, except to say “The first
transaction will be announced in the near-term.”
From the bottom up, the program is open to a host of investors, including
• Individuals who’ve had a net income of $200,000 in each of the two
most recent years, or who has joint net income with a spouse in excess of
$300,000 in each of the two most recent years, and in both cases have “a
reasonable expectation of reaching the same income level in the current
year.”
• Individuals and business entities (of which all members meet the
individual requirements in this category) with a net worth or joint net
worth that exceeds $1 million.
• Trusts with total assets in excess of $5 million.
• Banks, savings and loan or similar institution, broker dealers,
insurance companies, investment companies and business development
companies, as defined by relevant federal Securities, Securities Exchange
and Investment acts.
• Existing corporations, partnerships, limited liability companies,
business trusts and wholly-owned subsidiaries (including non-profits), as
well as local and state government agencies, all with assets exceeding $5
million and provided the applicant wasn’t formed for the purpose of
acquiring assets.
Each applicant must prove or agree to
• Financial ability to acquire and manage the assets.
• Sufficient experience and knowledge in the financial and business
matters and risks associated with investment properties.
• Keep certain information about the REO and related matters
confidential.
Get more information about the program at “Request for Information: REO
Asset Disposition” on the FHFA.gov website.