Story out today from CNBC via Yahoo! here.
There currently are about a quarter of a million foreclosed properties on the books of Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA), and millions more are coming.
The foreclosure processing delays of last year created a mammoth backlog of properties yet to be processed, which are just now being re-started.
Late-stage delinquencies still in the pipeline number close to two million, according to a new report from Lender Processing Services. Foreclosure starts outnumber foreclosure sales by two to one and "the trend toward fewer loans becoming delinquent, which dominated 2010 and the first quarter of 2011, appears to have halted," according to LPS.
Knowing this all too well, the Treasury Department, Federal Reserve, HUD, FDIC, Fannie Mae and Freddie Mac, with their conservator, the Federal Housing Finance Agency (FHFA) at the helm, are engaged in a collaborative effort to face this new wave of foreclosures head on and figure out a way to keep these properties from sitting on the books of the government and sitting empty in the nation's neighborhoods.
A number of institutional investors have shown appetite and interest in bulk REO deals, according to officials, but the plan has to incorporate ways to help facilitate financing. That has been one of the biggest roadblocks to deals already in the works between hedge funds and the major banks. Sources close to these private bank negotiations say there is plenty of cash to buy properties, but building out a management structure for the rentals is pricey, and some investors are finding the math doesn't add up to make it worth their while.
My hunch is that these homes will NOT sell unless they are deeply discounted to the Hedge Funds that are allegedly interested in foreclosed homes. And you can see from the above excerpt that the homes will ultimately be financed to the Hedge Funds anyway. This will take some creative accounting to make all of this work. They call this a "roadblock". What the Hedge Funds want is for banks to mark the homes down probably by at least 50%, and then provide low interest 100% financing, non-recourse, so that the Funds can start a revenue stream by putting some people into these homes via rental agreements, when the government could probably do the same thing themselves with the existing occupants similar to Warren's housing proposal for rental to existing occupants with a right of first refusal on a subsequent sale.
And no where in any of this is any mention that the reason homes are built is to provide shelter to people and families. The whole article has the context that homes exist and are built only to support their own financing schemes.