White House looks to shed foreclosed homes

Solicits proposals to purchase or rent properties

As of the end of June, Freddie Mac held nearly 60,600 foreclosed single-family homes, known as real estate owned, and Fannie Mae reported more than 135,700. As of the end of June, Freddie Mac held nearly 60,600 foreclosed single-family homes, known as real estate owned, and Fannie Mae reported more than 135,700. (J Pat Carter/Associated Press)
By Lorraine Woellert
Bloomberg News / August 11, 2011

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WASHINGTON - The Obama administration, aiming to boost a housing market showing little sign of recovery from the 2008 credit crisis, is seeking ideas for renting, selling, or disposing of foreclosed homes controlled by the government.

The Federal Housing Finance Agency, regulator of Fannie Mae and Freddie Mac, US Treasury Department, and the Department of Housing and Urban Development announced the solicitation yesterday.

The agencies are seeking to shrink the pool of foreclosures and boost home prices by finding investors for properties owned by the Federal Housing Administration and US-run Fannie Mae and Freddie Mac.

Selling or renting properties in blocks “may reduce taxpayer losses and meet the enterprises’ responsibility to bring stability and liquidity to housing markets,’’ FHFA acting director Edward DeMarco said.

President Obama has struggled to right the housing market since he took office in January 2009, four months after losses stemming from defaults on subprime loans pushed Fannie Mae and Freddie Mac into government conservatorship.

Freddie Mac and rival Fannie Mae have survived on government aid since they were seized in September 2008. Since then they have drawn almost $170 billion in Treasury aid to remain solvent.

As he prepares to seek reelection next year, critics say Obama has little to show for his efforts. The administration’s Home Affordable Modification Program has helped about 650,000 borrowers keep their homes, far short of the 3 million to 4 million it had targeted.

“In the 2008 campaign they said the president would come in and fix the housing problem,’’ said Keith Hennessey, who was director of the National Economic Council under President George W. Bush. “We literally couldn’t see a way that policy could solve the problem. I think they’ve figured that out now.’’

With yesterday’s announcement, the focus shifts from keeping borrowers in their homes to finding a future for the houses whose owners couldn’t be helped.

“They have mishandled the foreclosure process, now they’re stuck with all these properties,’’ said Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business. “This is political, but there’s also a certain amount of necessity here.’’

The announcement particularly seeks input from companies with “the technical and financial capability to engage in large-scale transactions.’’

One challenge is to find economies of scale for disposing of housing inventory scattered across the country. That might include auctioning houses in bulk to investors, finding firms to partner with Fannie Mae and Freddie Mac in managing rentals, or even demolition.

Proposals should be tailored to a region’s economic conditions and involve pools of property worth $50 million to $1 billion, the agencies said.