What should the federal government do to address the inventory of foreclosed properties?
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More foreclosed properties should be made available for rental opportunities. It's a risky business that requires the involvement of seasoned professionals, many of which have arisen through the NSP process. FHA should also develop a Multifamily Rental product that supports the aggregation and successful financing and operation of such properties.
Owners who are "underwater" on their mortgages should be offered an opportunity to convert to a servicing first mortgage that matches the market value of their homes, with a non-servicing second mortgage for the remaining balance that is shared between the lender/investors and the borrower upon sale. Ocwen Financial has pioneered such a "Shared Appreciation Modification" that could serve as a model.
Conrad Egan is Senior Advisor for the Affordable Housing Institute
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