LOS ANGELES--(BUSINESS WIRE)--The Federal Housing Finance Administration (FHFA) is moving ahead with its REO bulk sales pilot initiative in a highly secretive manner, despite vehement opposition from California congressional members, the negative economic impact to the state’s housing market, and cost to taxpayers, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.
The REO bulk sales pilot program calls for the sale of nearly 500 Fannie Mae-owned foreclosed homes in the Los Angeles and Inland Empire areas to yet 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,” said C.A.R. 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,” said Arnold.
In response to FHFA’s failure to implement the REO initiative in an open and transparent manner, C.A.R. is 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 is unknown 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“We are also greatly concerned that the FHFA used extremely outdated market data, perhaps as old as 2011, to determine property valuations,” said Arnold.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.”
“Wall Street investors don’t need government incentives to purchase properties by offering REOs at a discount price,” continued Arnold. “Savvy individuals recognize that the California real estate market represents an unprecedented investing opportunity and are already acting on it in droves.”
According to C.A.R. statistics, the targeted properties are in markets that have seen significant stabilization over the last three years. Not only is the Inland Empire experiencing a severe shortage of available housing, but demand is strong, and REO listings are selling in less than 30 days. The long-run average for unsold inventory in the Inland Empire is a 5- to 6-month supply, but currently stands at 3.1 months in Riverside County and 3.8 months in San Bernardino.
In May, California Congressmen Gary Miller (R-Brea) and seven other California congressional members introduced a bill that called for the FHFA to cease its bulk sales plan in California. H.R. 5823, the “Saving Taxpayers from Unnecessary GSE Bulk Sale Programs Act of 2012,” prevents the FHFA from implementing the sale of Fannie Mae real estate-owned (REO) properties in California to institutional investors.
The introduction of H.R. 5823 followed on the heels of a letter Congressman Gary Miller and 18 other California Congressional members sent to the FHFA in April asking the agency to refrain from implementing its “REO Initiative” pilot program in California. The letter stated, “We are concerned that including California counties in this initiative is in direct conflict with your duty as conservator to preserve and conserve the Company’s assets… In California, there is no question that disposing properties through bulk sales will yield a lower return for the GSEs and taxpayers than through traditional disposition methods. This means that such a program will increase losses to the taxpayer and GSEs,” the letter concludes.
Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 155,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.