Federal foreclosure initiative involves renting foreclosed homes

 

A federal initiative to have investors buy and rent out thousands of government-owned homes to prevent foreclosures is drawing cautious optimism locally.

The intent is to help stabilize falling home prices, particularly in neighborhoods hit by foreclosures. Local real estate observers generally think the government should make it easier for investors to buy, refurbish and lease out foreclosed homes.

Mike Swanson, vice president of Roseville-based Rottlund Homes, likes the idea of the government taking a more active role in stabilizing home prices.

"They need to do something to help us," Swanson said.

The Federal Housing Finance Agency said earlier this week that it is seeking input on how to avoid foreclosures by selling large quantities of homes – to be turned into rentals – currently owned by government-controlled mortgage companies Fannie Mae and Freddie Mac and the Federal Housing Administration.

The government owned roughly 248,000 foreclosed homes at the end of last month, officials said. About 70,000 of those are listed for sale. But officials expect the number of foreclosures to soar in the coming months.

The U.S. government rescued Fannie and Freddie in September 2008 and has funded them since the financial crisis. The mortgage giants own or guarantee about half the nation's mortgages and nearly all new mortgages.

Federal officials are accepting ideas through Sept. 15 for how to sell government-owned homes slated for foreclosure. The end of the supply of rental housing.

The government wants large-scale transactions rather than individual sales. The plan might involve management by a third party, a joint venture or some other structure to respond to local economic and real estate conditions.

"It's probably a good idea because these homes sitting around empty aren't helping values in the communities where they are," said Herb Tousley, director of the University of St. Thomas real estate programs.

Foreclosures still make up a sizable share of the for-sale market in the Twin Cities metro, putting downward pressure on prices. Foreclosures accounted for 1,141 sales in July versus 2,418 traditional sales, according to the Minneapolis Area Association of Realtors.

Jennifer Snyder, president of the St. Paul Area Association of Realtors, said she would like to see government ease the long and bureaucratic process of buying foreclosed homes.

"They just need to make it easier," she said.

Pat Paulson, an agent active with the Minneapolis Area Association of Realtors, also would favor officials helping ease the process for investors to buy and turn around foreclosures for rentals.

"The market's doing it right now, but it's a long, slow process and it is holding prices down," he said.

Gita Sitaramiah can be reached at 651-228-5472.

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