March 20, 2012 4:20 am
NAR urged the Federal Housing Finance Agency (FHFA) to proceed cautiously with its Real Estate-Owned (REO) Initiative pilot program to sell homes repossessed by government agencies to private investors to convert into rental units.
According to NAR President Moe Veissi, while REALTORS® support efforts to reduce high inventories of foreclosures, REO-to-rental programs are not necessary in certain areas and could be counterproductive to a real estate recovery. “In many communities REOs are already moving well through the normal processes, so we urge caution when proceeding with a rental program,” says Veissi.
According to a recent NAR analysis, while the overall visible inventory of foreclosures has been trending down across the country, there is a noticeable difference in foreclosure inventories in states that require judicial proceedings to foreclose on a property versus inventories in states that do not require the court’s intervention. Foreclosure inventories in judicial states are currently 2.5 times higher than non-judicial states. In addition, the disposition of foreclosure inventories is considerably faster in non-judicial states, where foreclosure sales rates are four times higher than in judicial states.
To prevent further increases in foreclosure inventory, NAR has repeatedly called for improved lending to creditworthy homebuyers and have urged lenders to make more loan modifications, mortgage refinancings, and short sales, which will help stabilize struggling housing markets.
“While REO-to-rental programs could be successful in a few communities, we believe that doing more to ensure mortgage availability for qualified homebuyers and investors could be even more beneficial in helping absorb excess foreclosure inventories across the country,” Veissi explains.
NAR urges that a national advisory board be created to ensure that current and future REO-to-rental pilot programs truly benefit the local community, minimize taxpayer losses and stabilize home values, and suggests substantial participation of local market experts, especially licensed real estate professionals, who have unparalleled knowledge of local market conditions.
Published with permission from RISMedia.