The Obama administration, is very close to announcing a pilot program to sell government-owned foreclosures in bulk to investors as rentals, CNBC has learned.The Obama administration, in conjunction with federal regulators and led by the overseer of Fannie Mae and Freddie Mac, is very close to announcing a pilot program to sell government-owned foreclosures in bulk to investors as rentals, according to administration officials.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. One of the initiatives of this program is for the federal government to be in the position to mitigate and manage any new wave of foreclosures, sources say. 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. As the Federal Reserve alluded to in its white paper on housing last week, "A government-facilitated REO-to-rental program has the potential to help the housing market and improve loss recoveries on reo portfolios." REO's (Real Estate Owned) are bank-owned properties, or, in this case, properties owned by the government-sponsored enterprises and the FHA. Three Fed governors pushed for similar plans in speeches last week, as well. "I think there is a fair amount of money in the wings waiting to buy, investors doing cash raises to buy properties on a large scale.” Laurie Goodman
Amherst Securities
They may be in talks, but the talks clearly aren't going well. When I asked the folks over at Fannie Mae to comment, they obliged quickly with, "We regularly review our policies regarding the modification of mortgages based on changing economic circumstances and our analysis of whether the effectiveness of the policies can be improved. We have been and will continue to work closely with FHFA on these matters." I know. The FHFA, the GSE's federal regulator charged with keeping the two mortgage giants afloat while still protecting taxpayers, responded with "No comment." It's all about the FHA's "short refi" program, which offers lenders cash incentives to reduce balances on underwater loans (by at least 10 percent), if the borrowers are still current on their payments. In turn, the lender can then refinance to an FHA-insured loan. So I called over to the FHA, where commissioner David Stevens had plenty to say, including that the GSE's were being "shortsighted." He used that word with several media outlets, I noticed. But he went on... "What we believe they need to value seriously is that unlike other modification programs where there's potential high redefault risk, and they retain the asset, the value of being able to monetize the remaining asset and not retain future risk has significant value." But the fact is, and I know it is barely a few months old, exactly three loans have made their way through the program to date. Fannie and Freddie hold the lions share of loans that would benefit from this, and the big servicers aren't going to jump in on their own without them. Bank of America [BAC Loading... () 
] spokesman Dan Frahm says BofA is still considering the FHA program, but admits, "Our calculations of the program show the number of our customers that would benefit from the program would be very limited without the participation of Fannie Mae and Freddie Mac." Bank of America already reduces principal in many of its proprietary modifications. Implementing the FHA program could result in "capacity strains of required technology and training programs" which Frahm says might not be justified by the benefits to so few eligible customers. With so much resistance to the program, rumors began circulating that FHA might dump the program, but apparently without merit. "No way," Commissioner Stevens told me this afternoon. "We are looking at what else could be done within reason to help make our programs work more effectively, but these are movements on the margin if anything."Questions? Comments? document.write("