Realtors Oppose REO-to-Rental Program
California legislators issue letter to FHFA
April 24, 2012
By ANDREW EDWARDS San Bernardino County Sun - McClatchy-Tribune Information Services
Gary Miller (R-Brea) and several other inland legislators are asking the Federal Housing Finance Agency to stay out of Southern California while testing a pilot program in which foreclosures would be sold in bulk to institutional investors.
In an April 4 letter, which Miller and other members of Congress sent to the FHFA's acting director, Edward DeMarco, the legislators contend the proposal would weaken the housing markets in Los Angeles and Riverside counties, where the government plans a trial run of bulk sales.
The legislators' argument against the bulk sales proposal largely rests on the idea that a sufficient number of buyers are willing to make offers on foreclosed homes in Southern California, so any bulk sales might have a negative effect on the markets in Los Angeles and Riverside counties.
"As such, we see no reason to alter the current system in these counties, as such action would only harm the market and result in greater losses," the letter reads.
The FHFA, which administers the government-sponsored mortgage investors Fannie Mae and Freddie Mac, did not provide a comment on Miller's letter.
The FHFA announced the pilot program in February as a means to dispose of Fannie-owned foreclosures in the United States' "hardest hit" real estate markets.
Besides Los Angeles and Riverside counties, the FHFA considers those markets to be Atlanta, Chicago, Las Vegas, Phoenix and parts of Florida.
In Los Angeles and Riverside counties, the pilot program would result in the sale of 663 homes and multifamily units.
The FHFA stated at the time the pilot program is intended to put foreclosed properties in private management and meet a demand for rental housing, as homes sold through the bulk sales program would be required to be put up for rent for a specified number of years.
The legislators' letter in opposition to the program puts the signatories on the side of the California Association of Realtors, which maintains bulk sales are unneeded in the face of dwindling inventories.
Resale prices of all California homes hit $291,080 in March, which was the first time in 16 months prices for existing homes rose on a year-over-year basis, according to Realtors' data.
Sales volumes in the Inland Empire and Los Angeles areas also ticked upwards last month, and inventories also shrunk.
For example, Los Angeles County had 4.3 months of homes listed in March, compared with 5.5 months one year prior.
Greg Galli, a member of the Realtors' distressed properties committee, said he is concerned the government may give a discount to the institutional investors buying homes through the bulk program.
Those investors may end up being large banks or hedge funds, said Galli, whose office is in Palmdale.
Although the amount of homes that could be sold through the pilot program itself would be a "blip" in a place as large as Los Angeles County, Galli said, he doesn't want to see the pilot program become a permanent one.
"Am I really concerned that they're going to do a test program? Only to the extent that they love it and they say they're going to do more," he said.
At this point, the FHFA has not announced any plans to try bulk sales in San Bernardino County.
Broker Janice Greene, who heads a Keller Williams Group branch in Redlands, said she doesn't want the program to be introduced to San Bernardino County.
Bulk sales, Greene said, would take away scarce business from brokers and real estate professionals.
"It's really undermining all the Realtors, the escrow, the title, the lenders," she said.