CA Lawmakers Urge State to Refrain from FHFA REO Program

Lawmakers, especially those in California, finally seem to be paying close attention to the real estate market and are trying to guide the state out of the crash that has helped cripple the state. And their target is the Federal Housing Finance Agency’s (FHFA) new REO pilot program.

Nearly 20 members of California’s congressional delegation sent a letter last week to FHFA Acting Director Edward DeMarco urging him to refrain from implementing the agency’s newest program in the state.

California Congressman Gary Miller, along with 18 other members of California’s congressional delegation, sent the letter claiming that the program would negatively impact the state’s housing market and raise costs for taxpayers.

“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 asset,” the letter states.

“In California, there is no question that disposing properties through bulk sales will yield a lower return for the government-sponsored enterprisess and taxpayers than through traditional disposition methods,” the letter continues. “This means that such a program will increase losses to the taxpayer and GSEs.”

The Federal Housing Finance Agency began the program in February to more efficiently sell bulk real estate-owned property held by Fannie Mae and Freddie Mac to investors. The program calls for the sale of more than 600 Fannie Mae-owned foreclosed homes in Los Angeles and Riverside counties to institutional investors.

But not every state organization agrees. The California Association of Realtors (CAR) points out that homebuyers in most of California’s markets are experiencing multiple offers, including for distressed and foreclosed properties. CAR claims that sales of bank-owned homes are closing in an average of less than 60 days — and often above the list price — without government intervention.

Do you think this would be a good program for the state? Or do you hope that the delegation gets its way and the program is dead on arrival?