Congressman asks FHFA to back off REO initiative
Program would hurt market, raise costs for taxpayers, Brea representative says
California Congressman Gary Miller (R-Brea), along with 18 other members of California's congressional delegation, issued a letter last week to Edward J. DeMarco, acting director of the Federal Housing Finance Agency (FHFA), urging DeMarco to refrain from implementing the agency's "REO Initiative" pilot program in California because it would negatively impact California's housing market and raise costs for taxpayers.
The REO Initiative pilot program calls for the sale of more than 600 Fannie Mae-owned foreclosed homes in Los Angeles and Riverside counties to institutional investors.
The California Association of Realtors believes this pilot program is not beneficial to the California market because housing inventory is extremely low and demand is high, CAR President LeFrancis Arnold pointed out. Home buyers in most of California's markets are experiencing multiple offers, including for distressed and foreclosed properties.
According to CAR data, sales of bank-owned homes are closing in an average of less than 60 days and often above the list price without government intervention.
"We commend the California congressional delegation's letter to Mr. DeMarco," Arnold said. "They clearly understand that this program may be a viable solution in states where there is a large inventory of unsold foreclosures."
"However, carrying out this plan in California would potentially further delay a housing recovery and, ultimately, result in greater losses for the taxpayer," he added.
Miller's letter stated:
"We are concerned that including California counties in this initiative is in direct conflict with your duty as conservator to preserve and conserve the Company's assets. In California, there is no question that disposing properties through bulk sales will yield a lower return for the GSEs and taxpayers than through traditional disposition methods. This means that such a program will increase losses to the taxpayer and GSEs."
The 19 California Congressional members who backed the letter include Miller, Jerry Lewis, Ken Calvert, Jeff Denham, Elton Gallegly, Dana Rohrabacher, Buck McKeon, Duncan Hunter, Brian Bilbray, Mary Bono Mack, Susan Davis, Brad Sherman, Joe Baca, Grace Napolitano, Judy Chu, Jim Costa, Adam Schiff, Barbara Lee and Howard Berman.