New Administration Plan to Save the Housing Market

According to CNBC Report, the Obama administration, together with federal regulators led by Fannie Mae and Freddie Mac is planning to announce a pilot program to sell government-owned foreclosures in bulk to investors who intend to use them as rental properties, according to administration officials. The goal of the program is to reduce supply by converting foreclosed homes into rental units. "Less supply - even less fear about a flood of foreclosed homes hitting the market could stabilize home prices", according to Jaret Seiberg of Guggenheim Securities.

The government is still working on what the pricing would be, how they can partner with private investors, and who will be managing the properties.

There are a number of institutional investors who have already shown their interest in bulk REO deals.  However, the new plan has to incorporate ways to help facilitate financing.

"Larger investors want to put their hands into 50, 100, 500 properties per deal, or $ 1 billion-plus in assets", says official close to the plan.

Families who have lost their homes to foreclosure tend to move to single-family rentals, so the proposal to convert foreclosures to rentals is justifiable.

Will this plan of the administration help the recovery of the housing market? If this plan pushes through, it will be good news for the new investors, as homeowners who have foreclosed properties prefer to rent, not to mention, the rentals are increasing.