 Finding a solution to the Foreclosure MessWednesday, September 28, 2011 - Article by: Nancy Releford -
The nation's foreclosure crisis is easy to identify, but solutions have so far eluded the best and brightest. Still, past failures haven't deterred new attempts to clear the glut of foreclosures weighing heavily on the balance sheets of both banks and the federal government. On Tuesday a Senate subcommittee met in Washington for a hearing to discuss and debate some these new ideas. Granted, hours of congressional testimony don't usually provide fodder for blogs, but some ideas presented Tuesday are worth highlighting. The hearing was prompted, in part, by the Obama administration asking investors for ideas on how to turn thousands of foreclosed homes owned by the government into rentals. (Lots of investors are already clamoring for a way into the single-family rental market.) Here's a quick rundown of ideas presented at Tuesday's hearing: Allan Dechert, president of the New Jersey Association of Realtors, a trade group: The Realtors recommend that any foreclosure solution must focus on providing mortgage financing to buyers and investors. Mr. Dechert suggested repurposing funds from the Troubled Asset Relief Program to encourage more lenders to modify loans and agree to short sales, in which a bank allows a home to be sold for less than what it is owed by the borrower. On foreclosures, Mr. Dechert argued strongly against bulk sales of REO, or homes repossessed by lenders, or, in this case, the government-sponsored entities. Bulk sales will result in big losses for Fannie and Freddie, Mr. Dechert argued, and drive down home prices. "Exclusively selling in bulk to large national investors at deep discounts will only work to further consolidate a large section of the housing market into the hands of a few market participants," Mr. Dechert said in his written testimony. Instead, the Realtors advocate a lease-to-own program that combines elements of REO-sale and rental-housing schemes. Bob Nielsen, chairman of the National Association of Home Builders: Builders, by the nature of the housing market, have a tough time competing with discount-priced foreclosures. So it's no surprise that the builders, like the Realtors, are worried about how the government might decide to sell REO. Mr. Nielsen urged the GSE's to avoid a "fire sale" of foreclosed properties so as not to depress prices further. The builders also urged converting foreclosures into rentals in a way that doesn't concentrate rental properties in to close clusters. The builders also urged a host of modifications to federal programs, including FHA-backed financing, the USDA Rural Development program and the Neighborhood Stabilization Program to be more open to investors. The builders also advocate a lease-to-own scheme. |
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