We have heard that Fannie Mae is cutting back on their REO outsourcers. From HW:
Treasury Secretary Timothy Geithner said the Obama administration is working on a plan to make it easier for Americans to refinance underwater mortgages and to turn REOs into rentals. The secretary said it’s likely the administration will move on this plan within the next few weeks.
Geithner made that assertion when quizzed by members of the House Financial Services Committee Thursday.
“We expect to move forward in the next couple of weeks with the Federal Housing Finance Agency to make it easier for Americans to refinance even if they are somewhat underwater,” Geithner told lawmakers. Geithner was short on details, but said some type of large plan to turn REOs into rentals is also on the table.
“We are trying to get this huge amount of vacant property on the market, and in the hands of people who can rent,” the Treasury secretary said.
The House Financial Committee’s Q&A with Geithner focused on housing at several key points.
One lawmaker pushed Geithner on why the white paper released by the Treasury on GSE reform in February had yet to make it into some type of final proposal.
Geithner assured lawmakers those discussions are ongoing and that the European debt crisis and other immediate fiscal concerns delayed the rollout of a final GSE reform plan, but assured the committee the Treasury continues to work on those proposals.
Geithner took heat from Democratic Congressman Luis Gutierrez (D-Ill.) who said he voted for the Home Affordable Modification Program, or HAMP, to help more homeowners stay in their properties, but ended up disappointed when only a slice of the $50 billion allocated for HAMP was spent to save distressed homeowners.
Geithner said the administration was prevented from reaching a large segment of distressed borrowers because a large number of underwater mortgages are ineligible for HAMP due to excessive debt levels or the fact they are classified as jumbos or loans on second homes.
“We are still looking for ways to expand the reach of these programs,” Geithner said. He told lawmakers the administration wants to propose a plan where Congress would allocate more funds to the Department of Housing and Urban Development to send resources to communities weighed down by foreclosures.
How about refinancing the small investors that provide the bulk of rental homes to the market? Force Fannie/Freddie to stop discriminating against folks that have more than four loans. Don’t reward the speculators that are underwater on everything, but help the small businessperson that has to deal with much higher operating costs but can’t reduce the cost of leverage.
Treasury Secretary Timothy Geithner said the Obama administration is working on a plan to………
Fill in the blank
Ugh
“Don’t reward the speculators that are underwater on everything, but help the small businessperson that has to deal with much higher operating costs but can’t reduce the cost of leverage.”
The fundamental problem in the system is too much leverage. It allowed the debt to grow to a level that is completely unsustainable. I don’t mind if you want to take on leverage with an entity that will eat the loss if you’re wrong but if the tax payers are going to eat bad decisions I’m against it.
BTW, what huge glut of homes needs to be put “in the hands of people who can rent”? In any market that has a viable economy, homes are selling briskly. Whether it’s San Diego, the Bay Area, suburban Washington D.C., New York, or even Phoenix, houses are selling.
In Detroit, it doesn’t matter in whose hands you put houses. No one works, and the government pays the landlord anyway. However, the resurging auto industry has pushed prices up and vacancy down in the nicer Detroit suburbs such as Birmingham. Houses are selling quickly there too.
The only people that will benefit from this proposal will be Wall Street and some large real estate investment funds. You want Goldman Sachs unclogging your toilet at midnight? Not gonna happen. Suburban slums are what we will get from this.
The real solution is simple. Get the government out of the market, and market clearing prices will be set. Level the financing playing field, and be done with the mess.
It’s my understanding that foreclosing and selling at the market price solves all problems and doesn’t cost anything.
Livingincali:
Lots of small investors who bought wisely and are NOT underwater are prevented from refinancing. The mortgage market is controlled by bipolar government bureaucrats that don’t want to do anything that would (heaven forbid) help someone make money. Get the government out of the market or at least out of the way.
AI-
1. you want the gov’t out of the market, but you want it to ease the terms so that you can take on more than 4 props with a gov’t subsidized loan?
2. if you get to refi at gov’t supported rates, you will then lower the rent on the taxpayers who pay the rent in your props?
What I said was level the playing field and stop making political/moral decisions as opposed to financial decisions or get out of the market and let the market decide.
Banks don’t hold loans much any more, and they depend on selling them. Right now, if you have fewer than four Freddie/Fannie loans and good credit, you can finance an investment property with a good downpayment under 5 percent and the loan gets sold to one of the GSE’s. Why? Because the risk premium for a non-owner occupied property is less than one percent.
If you have more than four loans, you would have to find a portfolio lender to buy or refinance. Yet experienced landlords with long track records and multiple properties are less likely to default.
Responsible landlords charge market rent and provide decent quality housing that is well maintained. When rents stagnate or go up slowly and the operating costs, such as repairs and capital improvements, skyrocket (not to mention taxes, insurance, utilities and government fees), maintenance and capital improvements are deferred. In a market where the cost of borrowing has declined dramatically, refinancing can free up the cash flow needed to do the improvements that make tenants happy and sustain property values.
If the government is going to get involved in rental housing policy by selling large numbers of houses at big discounts to put them “in the hands of people that can rent”, then why not extend a helping hand to the small landlord?
@ AI Its quite simple, for some reason (and I am a landlord) people hate landlords and want to do them down. Of course these same people complain about the lack of reasonably priced reasonably maintained rentals.
This sounds like another great Fed/Gov idea to prop up housing prices. Limit supply by throwing tenants in REOs?? Can’t wait to see how much money these renters are going to spend on improvements, remodeling, landscaping, etc. like a home buyer would. There will probably be some kind of renters tax credit for renting one of these REO properties also!! If paying buyers to buy homes didn’t work maybe paying tenants to rent them will!!(LOL) Having the Fed/Gov stay out of a free real estate market is the only way to fix the housing market and help turn the economy around.