As Fannie Mae and Freddie Mac continue to take possession of foreclosed homes at a rapid pace, Senate Democrats are voicing their impatience with their management of real estate owned (REO) properties.
On Aug. 10, Fannie and Freddie’s regulator, the Federal Housing Finance Agency (FHFA), along with the Department of Housing and Urban Development (HUD) and the Treasury Department announced that they were exploring options for allowing bulk sales of homes to investors and converting Fannie, Freddie and Federal Housing Administration (FHA) REOs in some markets into rental properties.
FHFA put out a request for ideas for sales, joint ventures and other strategies that would benefit Fannie, Freddie and FHA REO disposition programs, which were due Sept. 15.
In a letter to Fannie and Freddie’s regulator and Obama administration officials, 33 senators — including Senate Banking Committee Chairman Tim Johnson and every other Democrat on the committee — asked FHFA when it expected to finish its review of the proposals it’s received, and when it expected to move forward with a plan.
"With 10.4 million households in jeopardy of defaulting on their mortgages at the same time that the demand for rental housing is increasing, Americans are facing pressure on all fronts in the housing market," the letter said.
In a Sept. 23 report, the FHFA Office of Inspector General noted that Fannie Mae’s REO inventory grew from 25,125 properties in January 2007 to 162,489 at the end of 2010. Taxes and fees on REO properties represent a "significant financial risk" to Fannie and Freddie, and the management of REOs was a primary reason FHFA classified operational risks at both companies as a "critical concern," the report said.
FHFA hasn’t conducted a targeted examination of Fannie and Freddie’s REO management because the agency is short-staffed, OIG said in the report.