More Foreclosure Plans From Washington

This morning Arnold King wrote that, “I predict that in 2015 we will still be reading op-eds with suggested refinements to the housing bailout.  That is because the whole concept of bailing out mortgage borrowers is misguided.” He goes on to compare the whole process to the attempts to control oil prices in the 1970’s. It’s a good, tough article, so read it when you have time.

I mention this in conjunction with a new program that Freddie Mac is rolling out. As reported by Housing Wire it contains the familiar and increasingly tedious extension of a foreclosure moratorium together with a plan to rent foreclosed properties to the homeowner or tenant in the case of a rental property.  

Freddie Mac said Thursday morningthat it had officially launched its new REO Rental Initiative, which will allow tenants and former owners the option to lease their recently foreclosed properties on a month-to-month basis. The new initiative will be managed by HomeSteps, Freddie Mac’s national real estate unit, and implemented through several national property management firms; the GSE declined to identify which property management firms had obtained a contract to manage the program.

The GSE also announced it will continue to suspend all eviction actions until April 1, 2009, “to ensure there is ample time for current occupants to learn about the options available to them under the new initiative.” Freddie, along with sister GSE Fannie Mae, has halted all eviction activity since mid-December under various auspices.

Freddie Mac’s Ingrid Beckles, senior vice president of default asset management, said the program would give “renters and former owners more time to determine what options are best for them and their families,” and argued that the program would stabilize property values as well.

A couple thoughts.

How is this going to stabilize property values? The house has been foreclosed on, its one more piece of residential real estate that is going to get thrown on the market. More supply to a glutted market. Why is the presence of the former owner or tenant going to stop the downward slide of prices. Can we just quit making these profound unsupportable claims.

I could argue that it will destabilize prices.

Freddie says they will market these properties while occupied. That is not an easy sale. Any prospective purchaser with half a brain had better ask himself just what kind of shape is this property going to be in when I do get the keys. Foreclosed owners and tenants have not been gentle with homes as they departed.

 You might also want to know if you really get possession when you close the loan. There is always the chance that you show up with your moving van and the occupants are still there. What are you going to do, call the cops? Guess again. You will have to evict the squatters and that can take a month at best and up to three months or more in the blue states. 

A niggling complaint. Why are the names of the property managers that Freddie (the taxpayers) retained such a deep, dark secret? Is there a national security issue here? The penchant of this administration to stonewall so soon in its tenure is getting to be troubling.

Arnold King was spot on. This is going to go on seemingly forever. Programs that fail will beget programs to cure the defects of the failure and on and on it will go.  

more: here

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