Thursday, August 23, 2012

Realtors accuse Current Administration of secret bulk sales

According to the California Association of Realtors (CAR), the Federal Housing Finance Administration (FHFA) is moving ahead with its REO bulk sales pilot program, and it’s doing so in a secretive manner “despite vehement opposition from California congressional members, the negative economic impact to the state’s housing market, and cost to taxpayers.”




CAR’s complaint applies only to California, but FHFA has also offered bulk homes for sale in Florida. In July, for example, it announced that 775 homes – 190 in Central and Northwest Florida, 418 in Southeast Florida and 167 on the West Coast – had winning bids from buyers, and it expected to close within a few weeks.



Florida Realtors has expressed concerns to The National Association of Realtors® (NAR) about the issue and is requesting member feedback on how the FHFA bulk sales issue affects the Florida market.



The REO bulk sales pilot program covers a number of U.S. cities, but CAR’s complaint specifically looks at 500 Fannie Mae-owned foreclosed homes in the Los Angeles and Inland Empire areas sold to undisclosed institutional investors.



“We are disappointed that Fannie Mae and the FHFA fail to understand that this initiative will harm the communities in which it will be implemented and are going forward with this ill-conceived plan,” says CAR President LeFrancis Arnold. “Moreover, not only are Fannie Mae and FHFA moving forward with the plan, they are refusing to disclose any details, such as property locations, final property count, sales price, or names of winning bidders.”



C.A.R. says it’s filing a request for details through the Freedom of Information Act.



The FHFA, Fannie Mae’s conservator, announced earlier this summer that winning bidders in the foreclosure auction had been chosen, with transactions expected to close in the third quarter. In July, Fannie Mae created an LLC in California, called SFR 2012-1 US West LLC, to transfer the foreclosed properties from Fannie Mae to the LLC. It’s unclear whether the winning bidders will purchase the full LLC or only a share, thus splitting the ownership between Fannie Mae and the winning bidders.



“We are also greatly concerned that the FHFA used extremely outdated market data, perhaps as old as 2011, to determine property valuations,” adds Arnold. “Because the transactions are only now in the process of closing, these dated valuations will drag down the Inland Empire’s home prices, which have shown strong signs of stabilization. Additionally, because of this price discrepancy and the very nature of bulk sales, we believe Fannie Mae is assured to not receive fair market value for the properties, thereby saddling taxpayers with their loss.”



Arnold says that Wall Street investors don’t need government incentives to purchase properties by offering REOs at a discount. “Savvy individuals recognize that the California real estate market represents an unprecedented investing opportunity and are already acting on it in droves,” he says.



NAR voiced concerns to the Federal Reserve Board in March about REO sales to investors. NAR recommended that any REO bulk sales program be limited to small geographic areas that need alternatives to individual investors; and it should rely on the expertise of local businesses, nonprofit organizations and local government for implementation.



According to C.A.R., the California properties are in markets that have had stabilized over the last three years. The Inland Empire currently has a severe shortage of available housing, demand is strong, and REO listings sell in less than 30 days. The long-run average for unsold inventory in the Inland Empire is a 5- to 6-month supply, but it currently stands at 3.1 months in Riverside County and 3.8 months in San Bernardino.



© 2012 Florida Realtors®





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