REO to Rental: What’s going on NOW?
As more news comes out about the plan to shift from blighted, vacant, unoccupied REO properties to a Rental model, many realtors and teams have made plans in advance to change from property sellers to property managers, even as REO inventory continues to plummet. Therefore most people in the industry are following the development very closely. In fact, some estimate that they stand to make large amounts of money from the change. In a revenue-generating plan, one partnership called Oaktree Capital Management plans to make many hundreds of millions of dollars from the change.
However, as many stand to gain tremendously, there has always been a significant uneasiness about not only the Fed artificially trying to stimulate the market once again, but the government providing additional loan funds for the industry. Rick Sharga, executive vice president of a mortgage holding company stands by the opinion that there doesn't need to be any large involvement by the federal government, at least financially, due to plenty of capital reserves from investors.
Sharga contends there's no need for governmental financing (there's plenty of capital available) and deep discounts won't be needed to get investors involved. As testament to its popularity, thousands responded to the Federal Housing Finance Agency's (FHFA) request for information.
Thus far, the FHFA has only released about 1% of the REO inventory for the cause and haven't been quick to act. Additionally, the non-selective nature of the program leaves much to be desired. For example, investors don't have much say in what properties they can buy up in a bulk deal - they are pre-determined by the FHFA and come in geographically grouped "deals." It is speculated that the FHFA will have to offer large discounts on properties that are generally unappealing to investors to get them to seem even the least bit interested.
It's clear that there's still much to do regarding the program, but as the FHFA pilot program moves on we're sure to see whether the program's forecast is a good or bad one ultimately.