In a release Wednesday, the association accused FHFA of “moving ahead with its REO bulk sales pilot initiative in a highly secretive manner, despite vehement opposition from California congressional members, the negative economic impact to the state’s housing market, and cost to taxpayers.”
The pilot program calls for the auction of nearly 500 Fannie Mae-owned foreclosed homes in the Los Angeles and Inland Empire areas. FHFA (Fannie Mae’s conservator) announced earlier in the summer that winning bidders had been chosen for the homes and that the transactions would be closed in the third quarter. The identities of those investors have not been disclosed.
“We are disappointed that Fannie Mae and the FHFA fail to understand that this initiative will harm the communities in which it will be implemented and are going forward with this ill-conceived plan,” said C.A.R. president LeFrancis Arnold. “Moreover, not only are Fannie Mae and FHFA moving forward with the plan, they are refusing to disclose any details, such as property locations, final property count, sales price, or names of winning bidders.”
Arnold also expressed concern that FHFA used outdated market data to determine property valuations. Because the transactions are only now in the process of closing, Arnold said he expects the outdated valuations to bring down home prices in the Inland Empire.
He also said that the price discrepancy will cause a loss for Fannie Mae which will then be passed down to taxpayers.
In response to what the C.A.R. calls “FHFA’s failure to implement the REO initiative in an open and transparent manner,” the organization has filed a request for details through the Freedom of Information Act.
C.A.R. isn’t the only group opposed to FHFA’s plan. In May, eight members of the California State Legislature introduced a bill calling for FHFA to stop its bulk sales plan in the state. The “Saving Taxpayers from Unnecessary GSE Bulk Sale Programs Act of 2012” would prevent FHFA from implement the sale of Fannie Mae REO properties in California to institutional investors.
In addition, 18 California congressional members sent a letter to FHFA in April asking the agency to refrain from implementing its pilot program in the state, citing potential losses to the GSEs and taxpayers and questioning the appropriateness of the program given FHFA’s conservator status.
For its part, C.A.R. noted that the targeted properties are in markets that have seen increased stability in the last several years, with demand in the Inland Empire strengthening considerably.
“Wall Street investors don’t need government incentives to purchase properties by offering REOs at a discount price,” Arnold said. “Savvy individuals recognize that the California real estate market represents an unprecedented investing opportunity and are already acting on it in droves.”
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