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REO to Rental

The Federal Housing Finance Agency announced the first step of a Real-Estate Owned (REO) Initiative that allows investors to buy pools of bank-owned (REO) properties in the nation’s hardest-hit metropolitan areas. 

Effective Feb. 1, investors may pre-qualify to bid on transactions in the initial pilot phase as well as subsequent phases.

The REO Initiative will allow qualified investors to purchase pools of foreclosed properties providing they agree to rent the purchased properties for a specified number of years. FHFA established the investor program as a way to move foreclosed homes off the market and, at the same time, add rental properties in markets where rental inventory continues to decline.

The pre-qualification process requires investors to show FHFA that they have the financial capacity to buy properties, and the experience to operate them in a way that helps stabilize their communities.

During the pilot phase, Fannie Mae will offer for sale pools of various types of assets including rental properties, vacant properties and non-performing loans with a focus on the hardest-hit areas. The first transaction will be announced shortly.

To pre-qualify, an investor must:

• have the financial wherewithal to acquire the assets
• possess sufficient experience and knowledge in financial and business matters to analyze and bear the risks of the investment opportunity
• agree to keep certain information about the REO and related matters confidential.

Interested investors can register at FHFA’s REO Initiative page to pre-qualify.

FHFA is also looking at ways to improve REO sales to homeowners and small investors. Both companies sell the majority of their REO properties to owner-occupants at close to market value.

To register as an investor for the pilot program, visit FHFA’s website.