REO-To-Rental Program Proceeds With Caution

 

The FHFA’s senior associate director for housing and regulatory policy Meg Burns testified to lawmakers about the intention of the REO-To-Rental pilot program.  According to Burn’s statement the REO-To-Rental pilot program is designed to:

1. Gauge investor interest in single family rental housing and discover how much they are willing to pay to purchase REO properties in bulk.

2. Determine whether bulk purchases of REO properties will allow investors to remain civic minded and foster stable communities while managing such a large number of properties.

3. Determine whether this type of bulk REO-To-Rental model is sustainable and easily replicated in other markets.

After much debate and resistance, the REO-To-Rental pilot program has been scaled back to include only Fannie Mae properties which are already renter occupied in select states.  Arizona, California, Florida, Georgia, Illinois and Nevada are states selected to participate in the REO-To-Rental pilot program. But California is still in a battle to exclude itself from the REO-To-Rental pilot program stating that the demand for REOs in their state has increased significantly.

Because of the backlash from states, Burns has tried to make it clear that he has no intention of expanding the program on a national level. But despite his statements, there are no guarantees that the REO-To-Rental program would not expand significantly to include other states, such as Washington if those states eventually meet the criteria set by the pilot program.

The biggest threat from this REO-To-Rental program is that it will cannibalize the REO market and place a significant number of REO properties into the hands of a few bulk investors. This can’t be a good trend for communities or individual buyers who depend on the REO market when searching for high quality properties at bargain prices.

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