Monday, August 29, 2011

U.S. Government Struggles As The Biggest Seller of Homes

Activists of all sort are pushing the Federal government to lease out foreclosed home, but there are some major problems with that.
Moreover, it remains to be seen whether converting REO to rental will work. Leasing requires money to bring properties up to code, adds to liability costs and requires an infrastructure to manage the inventory. It also delays the government’s ability to recover anything from their repossessed properties, said FHA Acting Commissioner Carol Galante.
“It isn’t necessarily our preference that FHA is going to itself continue to hold these properties,” Galante said in an interview. “We want to move homes through the system so we can recover.”
At the same time, the agency can’t maximize returns if it sells too many houses at once.
“If you’re putting too much through that system you are helping to drive down prices,” Galante said. “If there’s some siphoning off of some of that stock, it can help stabilize the prices. We could be better off. The proof will be in the pudding.”
 And this regards to refinancing homeowners with negative equity.
Current low interest rates offer an opportunity, with 30- year-fixed loans hovering just above 4 percent. The administration is weighing ways to allow distressed or underwater borrowers to refinance into a lower-rate mortgage, freeing up billions of dollars to boost consumer spending.
The complexity of mortgage finance promises to make any housing fix difficult to implement, as the administration discovered when it launched a mosaic of loan-modification programs three years ago.
Since the 2008 financial collapse, Obama and his aides have focused housing efforts on extricating borrowers from high-cost loans, aiding delinquent homeowners, and stabilizing neighborhoods. Now the most pressing problem has shifted to what to do with properties left by borrowers who couldn’t be helped.
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