What should the federal government do to address the inventory of foreclosed properties?
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REALTORS® appreciate the Administration’s attempts over the last two and half years to keep families in their homes. However, nearly all the federal programs that were put into place have depended on the efforts of large financial institutions to assist consumers. Many of these institutions received vital funding from both the Treasury Department and Federal Reserve Board throughout the economic crisis, but these same institutions have denied similar support for families across the country. One of the key purposes of this extraordinary backing of these institutions was to ensure that liquidity supporting mortgage lending for all types of housing remained throughout the crisis; yet many creditworthy households remain unable to obtain fair and affordable mortgages.
REALTORS® know firsthand that another shot needs to be taken to fix the housing crisis, particularly the large inventory of foreclosed and REO properties that continues to grow. Just as the Federal Reserve stated in its January 4 white paper, REALTORS® believe we must increase mortgage financing for qualified purchasers and expand the resources for loan modification, refinancing and short sale efforts. Specifically, REALTORS® believe the federal government should:
- Expand resources dedicated to pre-foreclosure efforts, including loan modifications and short sales (foreclosures are typically more costly than loan modifications and short sales, so this would minimize the need for more taxpayer dollars being used to support the GSEs).
- Focus on providing mortgage financing to qualified homebuyers and investors to increase the absorption rate of the current foreclosure and REO inventory and prevent increases to the existing REO inventory. Lifting the current moratorium on investor access to the FHA 203 (k) rehab loan program will accelerate this absorption and contribute to neighborhood and housing market stability.
- Continue the timely and orderly disposition of foreclosure and REO inventory assets and, in limited geographic areas where alternatives are needed, rely on the expertise of local businesses including contractors, real estate brokerage firms, and professional property management companies.
NAR suggests that as the federal government looks for ways to address the inventory of foreclosed properties, the guiding principles should be to assist in reducing the number of properties in the foreclosure process that will add to the REO glut, maximize the recovery on REO assets currently held by FHA and the GSEs, and preserve housing values in neighborhoods across the country.
NAR also urges the agencies to create an advisory board made up of public and private industry participants, including real estate professionals, to ensure that the efficient disposition of foreclosed and agency REO properties minimizes taxpayer losses, charges to the FHA fund, and negative effects on local real estate markets.
The last two and half years have shown that, with housing prices bumping along the bottom, a robust recovery of the economy will remain exceedingly difficult. The government has an unprecedented opportunity to minimize the impact distressed assets have on local real estate markets and ensure the stabilization and eventual revitalization of neighborhoods.
To learn more about NAR’s views on this issue, please visit http://www.ksefocus.com/billdatabase/clientfiles/172/3/1325.pdf. Joseph M. Ventrone is Vice President of the National Association of Realtors’ Regulatory and Industry Relations Department.
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