foreclosure

The foreclosure epidemic plaguing this country since the sub-crime crisis has been the subject of much news coverage. While the countless stories of shattered neighborhoods sets the tone of the foreclosure conversation, there is a flip-side. To some, these foreclosed homes represent an ideal investment opportunity. But exactly what sort of investor has entered the market, and what does this mean for the properties and the neighborhoods riddled with boarded-up homes? According to a new study in the Journal of Planning Education and Research, “A large majority of the low-value homeswere purchased by small investors, and purchases of foreclosed homes in low-income neighborhoods were dominated by investor-buyers.”

courtesy of flickr user respres

The report, entitled Distressed and Dumped: Market Dynamics of Low-Value, Foreclosed Properties during the Advent of the Federal Neighborhood Stabilization Program, goes on to explain the implications of this finding:

While responsible investor activity in the market will aid in reutilizing these properties and should provide increased supplies of affordable, decent-quality rental housing, such activity may not be the predominant type in heavily affected communities. Some investor properties may remain unoccupied and boarded up or dilapidated, especially if investors are betting on near-term increases in values and hoping to merely resell the property in a fairly short order. Other investors may seek to rent out properties without rehabilitating what are likely to be very physically distressed homes; these properties may continue to have significant, negative spillover impacts on neighborhoods.

In short, small time investors, with scarce resources to improve properties, hoping for a short-term return, take poor care of their newly purchased investments. While healthy investor activity can and should play an important roll in the housing recovery, purchasing homes as speculative, short-term, investments often has negative implications for the physical state of the foreclosed home and the neighborhood containing it.

Fore more coverage on the story, read The Atlantic Cities piece: Who’s Buying Foreclosed Homes and Why It’s a Problem

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Some interesting news out of DeKalb County, GA courtesy of wsbtv. A grand jury has indicted three people for a scheme to take-over/steal foreclosed homes:

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As we noted earlier today, the administration was going to seek input on how to reclaim some of the value of foreclosed properties, through measures like converting properties into rental units. Here is the official press release announcing the request for input:

FHFA Public Affairs
HUD Public Affairs
Treasury Public Affairs
FOR RELEASE
Wednesday
August 10, 2011

FHFA, TREASURY, HUD SEEK INPUT ON DISPOSITION OF REAL ESTATE OWNED PROPERTIES
Range of Ideas Sought, Including Transition to Rental

Washington, DC – The Federal Housing Finance Agency (FHFA), in consultation with the U.S. Department of the Treasury and Department of Housing and Urban Development (HUD), has announced a Request For Information (RFI), seeking input on new options for selling single-family real estate owned (REO) properties held by Fannie Mae and Freddie Mac (the Enterprises), and the Federal Housing Administration (FHA).

The RFI’s objective is to help address current and future REO inventory. It will explore alternatives for maximizing value to taxpayers and increasing private investment in the housing market, including approaches that support rental and affordable housing needs.

“While the Enterprises will continue to market individual REO properties for sale, FHFA and the Enterprises seek input on possible pooling of REO properties in situations where such pooling, combined with private management, may reduce Enterprise credit losses and help stabilize neighborhoods and home values,” said FHFA Acting Director Edward J. DeMarco. “Partnerships involving Enterprise properties may reduce taxpayer losses and meet the Enterprises’ responsibility to bring stability and liquidity to housing markets. We seek input on these important questions.”

“As we continue moving forward on housing finance reform, it’s critical that we support the process of repair and recovery in the housing market,” said Treasury Secretary Tim Geithner. “Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets, and support neighborhood and home price stability.”

“Millions of families nationwide have seen their home values impacted as their neighbors’ homes fall into foreclosure or become abandoned,” said HUD Secretary Shaun Donovan. “At the same time, with half of all renters spending more than a third of their income on housing and a quarter spending more than half, we have to find and promote new ways to alleviate the strain on the affordable rental market. Taking steps to encourage private investment in REO properties and transition them into productive use will help stabilize neighborhoods and home values at a critical time for our economy.”

The RFI calls for approaches that achieve the following objectives:

  • reduce the REO portfolios of the Enterprises and FHA in a cost-effective manner;
  • reduce average loan loss severities to the Enterprises and FHA relative to individual distressed property sales;
  • address property repair and rehabilitation needs;
  • respond to economic and real estate conditions in specific geographies;
  • assist in neighborhood and home price stabilization efforts; and
  • suggest analytic approaches to determine the appropriate disposition strategy for individual properties, whether sale, rental, or, in certain instances, demolition. FHFA, Treasury and HUD anticipate respondents may best address these objectives through REO to rental structures, but respondents are encouraged to propose strategies they believe best accomplish the RFI’s objectives. Proposed strategies, transactions, and venture structures may also include:
  • programs for previous homeowners to rent properties or for current renters to become owners (“lease-to-own”);
  • strategies through which REO assets could be used to support markets with a strong demand for rental units and a substantial volume of REO;
  • a mechanism for private owners of REO inventory to eventually participate in the transactions; and
  • support for affordable housing.

To view the RFI, please visit here .

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The Obama administration has announced that it will seek proposals on how to turn thousands of foreclosed properties into rental units. The novel approach would prove a boon to affordable housing stock as the large number of rental units would ease pressure on the rental market. The proposals will be jointly solicited by the Federal Housing Finance Agency, the Treasury Department and the Department of Housing and Urban Development

According to an administration statement, the goal is to, “explore alternatives for maximizing value to taxpayers and increasing private investment in the housing market, including approaches that support rental and affordable housing needs.”

Read more on the story here: Obama team seeks ideas on foreclosed properties

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Yesterday, the Obama administration announced adjustments to Federal Housing Administration (FHA) requirements that would require FHA-approved lenders to extend special forbearance to 12 months (from 4 months) for un- or underemployed borrowers who are at least three months behind in their mortgage. Here is the press release announcing the policy:

HUD No. 11-139
HUD Public Affairs
(202) 708-0980
Treasury Public Affairs
(202) 622- 2960
FOR RELEASE
Thursday
July 07, 2011

OBAMA ADMINISTRATION OFFERS ADDITIONAL MORTGAGE RELIEF TO UNEMPLOYED HOMEOWNERS
Adjustments to FHA and MHA requirements to allow 12-month Forbearances

(Washington, DC)-Today, the Obama Administration announced adjustments to Federal Housing Administration (FHA) requirements that will require servicers to extend the forbearance period for unemployed homeowners to 12 months. The Administration also intends to require servicers participating in the Making Home Affordable Program (MHA) to extend the minimum forbearance period to 12 months wherever possible under regulator and investor guidelines. These adjustments will provide much needed assistance for unemployed homeowners trying to stay in their homes while seeking re-employment. These changes are intended to set a standard for the mortgage industry to provide more robust assistance to unemployed homeowners in the economic downturn.

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From the Detroit News:

[Mayor] Bing unveiled an unprecedented plan Monday to offer 200 tax-foreclosed homes in the East English Village and Boston-Edison neighborhoods to [police] officers. The plan calls for officers to pay up to $1,000 for the homes while receiving as much as $150,000 apiece in grants to rehabilitate them.

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The second story in the No Way to Live series chronicles a Michigan family’s foreclosure troubles, troubles that the Home Affordable Modification Program (HAMP) failed to alleviate:

Michigan Family Says Obama Foreclosure-Prevention Program Cost Them Their Home

Dylan talks HAMP with Rep. Brad MIller (D – North Carolina):

Visit msnbc.com for breaking news, world news, and news about the economy

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The first piece in the series entitled week long series “No Way To Live” takes a look at the effect of foreclosure on low-income apartment renters:

The Latest Victims Of The Foreclosure Crisis: Low-Income Apartment Renters

On his MSNBC program, Dylan interviewed Ryan McEachron, the mayor of Victorville, a community particularly hard-hit by the wave of foreclosures stemming from the financial crisis:

Visit msnbc.com for breaking news, world news, and news about the economy

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From WLS-TV ABC 7 in Chicago:

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