The Feds are about to solve the housing mess

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#1 Tue, Jan 3, 2012 - 11:58am
Eternal Student
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The Feds are about to solve the housing mess

117

Do pardon the sarcasm in the title, but here's the most important news, IMHO, in the Housing sector:

https://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/12/28/BUNA1MHA6E....

Last summer, I noticed that the Government had issued an RFP (Request for Proposals) on how to deal with the Shadow Inventory. In short, the Feds seriously started dumping foreclosures onto the market, as some have noticed. However, they are simply overwhelmed, and just cannot deal with the sheer number of houses that they have.

So they asked the hedge funds, on how to deal with batches of houses, at $50-100 Million a bundle. Bundling up these and selling them off, just like the bogus MBS's which got us into this mess.

The idea here is that the Hedge Funds will snap these up, turn them into Rentals, or maybe even sell them off.

"In our opinion, this is the most important housing-related program under consideration"

Gosh, what could possibly go wrong here? Let's see, you can kiss the rent/buy ratio good-bye, which in turn will seriously impact housing prices. And remember those "savvy investors" who were snapping up foreclosures at auctions a couple of years ago, and turning them into rentals? It was a positive frenzy then. Those "investments" are about to take a serious hit.

One thing no one is considering is the people who rent these places. Who the heck wants a hedge fund as a landlord? Those folks will ignore any complaints. I foresee a lot of problems being reported by people who are attracted by the cheap rent.

The only positive thing that I see here is that there's some positive movement on the Shadow Inventory. But get this quote:

"The hope is that a larger unified program is established that could move the needle a year or two down the road.". Translation: Kick the Can down the road a year or two.

We shall see about that one.

Edited by: Eternal Student on Nov 8, 2014 - 5:02am
Tue, Jan 3, 2012 - 3:17pm
jacey
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excess inventory

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In the late '80s early 90's after the savings and loan crisis, the bank owned real estate flooded the market in conjunction with the development of the Resolution Trust Corp to handle the assets of the banks. https://www.referenceforbusiness.com/encyclopedia/Res-Sec/Resolution-Trust-Corporation-RTC.html#b

Housing prices and rents plummeted at that time. Bad for investors & home sellers/good for homebuyers & renters. I can see that happening again over the next year or so as more and more foreclosures occur. And since Fannie & Freddie hold most of those assets, they'll create something new to handle it all. Get them off the governments books & try to make a buck. Flooding the market with these homes not only will cause reduced home values, they will also force competition for renters with the multi-family industry, causing rents to hit rock bottom again.

If they bundle them off, hedge funds likely will have a management company waiting in the wings. Back in the day, I managed property for a company that specialized in REO management. It was a unique time in real estate. I am curious to see how all this will play out over the next few years.

Thanks for the link smiley

Tue, Jan 3, 2012 - 4:42pm (Reply to #2)
Eternal Student
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@jacey

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You're welcome, and thank you for the interesting comment.

Also, come to think of it, I would absolutely love to have John Paulson as a landlord. I'd pay money to be able to call him up, and tell him to come over and fix my toilet! :)

Wed, Jan 4, 2012 - 4:12pm
I Run Bartertown
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It's worse than you think

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 Wait until they approve your neighbor's foreclosed $600k house as a section 8 rental and lure in the worst of the welfare rats for block-busting duty.

"Honey, come meet the new neighbors...oh, nevermind, they already raped, robbed, and killed you..."

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