Myrtle Beach Real Estate by Mirela

A Huge Housing Bargain -- but Not for You

A Huge Housing Bargain -- but Not for You

The largest transfer of wealth from the public to private sector is about to begin. The federal government will be bulk-selling the massive portfolio of foreclosed homes now owned by HUD, Fannie Mae and Freddie Mac to private investors -- vulture funds.

These homes, which are now the property of the U.S. government, the U.S. taxpayer, U.S. citizens collectively, are going to be sold to private investor conglomerates at extraordinarily large discounts to real value.

You and I will not be allowed to participate. These investors will come from the private-equity and hedge-fund community, Goldman Sachs(GS_) and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction.

In the process, these investors will instantaneously become the largest improved realestate owners and landlords in the world. The U.S. taxpayer will get pennies on the dollar for these homes and then be allowed to rent them back at market rates.

On Wednesday, the Federal Housing Finance Agency (FHFA), the Department of Housing and Urban Development (HUD) and the U.S. Treasury Department issued a Request for Information (RFI) concerning the disposition of the inventory of foreclosed homes owned by the federal government.

An RFI is ostensibly a way for the federal government to get input from the private sector on how to accomplish the goals laid out in the request. But that's really just a facade, as the RFI was structured by the investors to begin with.

In reality, the RFI is a way for the members of Congress to find out if they can get away with bulk-selling these homes to privatecompanies without incurring the wrath of their constituents, taxpayers and former owners of the properties.

The federal government will be bulk-selling the massive portfolio of foreclosed homes now owned by HUDAssuming taxpayers don't push back, the next step will be to issue a Request for Proposals (RFP). The RFP will be the bid and plan for these homes by investors.

The way to keep taxpayers from pushing back is to structure the RFI so that the real intention, the bulk sales, is masked by feel-good goals, such as stabilizing neighborhoods and increasing the supply of rental properties.

As intended, the mass media are playing their part in classic style. Every major newspaper in the U.S. has run articles discussing the plan as a rental conversion, allowing readers to assume that Fannie, Freddie and HUD will be renting the properties directly to families who need housing. And although there is an allowance for these kinds of rentals, it is a minor political facade to the obvious true goal of bulk-sale privatization of these homes.

The investors in this program have been waiting for this opportunity since the portfolio of homes owned by HUD began to spike in 2007, when foreclosures surged first in the "Rust Belt," principally Ohio and Michigan.

Since then, of course, the systemic collapse of housing has engulfed all of the major urban coastal regions of the U.S., as well as Phoenix and Las Vegas, and caused the homes owned by Fannie Mae and Freddie Mac, which are now under the direct control of the U.S. Treasury Department, to spike as well.

Even before this crisis occurred, HUD, i.e. the U.S. government, was the largest improved real estate owner in the world, because of its portfolio of foreclosed homes, which is classified as "real estate owned" (REO). The entire massive HUD REO Portfolio is quietly managed by a handful of private firms already, a group listed as Management and Marketing Contractors.

These M&M companies are principally owned by and employ former high-ranking government officials from the various germane agencies -- the Treasury, HUD, FHA and others. And they will provide the necessary access to the current government employees who are tasked with bringing this program to fruition. Once the privatization is complete, those government employees will move from their positions, and many will take up new employment at one of the M&Ms or the new vulture funds.

I am not currently aware of any way for retail investors to participate in this process.

It is probable, however, that once the privatization has occurred and the properties are generating rental income for the investors, the initial investors will cash out by forming real estate investment trusts (REITs), real estate operating companies (REOCs) or limited partnerships (LPs) that will be made available to retail investors.

Link to original article: A Huge Housing Bargain -- but Not for You

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Comment balloon 7 commentsMirela Monte • August 24 2011 04:08PM


Soon, the plunder will be complete.  All done in plain sight... 

Posted by Mirela Monte, Myrtle Beach Real Estate (Buyers' Choice Realty) about 9 years ago

Okay, now I am mad.  What in the world is going on in Washington.  They must be nuts.  I had heard that they might start renting some of the HUD homes which seemed like a huge risk, too.   But, at least, some people would be off the streets.  This is madness.

Posted by Don Sabinske, Sabinske & Associates Inc. (Don Sabinske, Sabinske & Associates Inc.) about 9 years ago

They will get away with it, at least in this life. “They” are the Wall Street usurers, people of a sort condemned in Scripture, who have brought more misery to this nation than we have known since the Great Depression. “They” will not suffer for their crimes because they have a majority ownership position in our political system. That is the meaning of the banking plea bargain that the Obama administration is pressuring state attorneys general to negotiate with the titans of the financial world.

It is a sellout deal that, in return for a pittance of compensation by banks to ripped-off mortgage holders, would grant the banks blanket immunity from any prosecution. That is intended to short-circuit investigations by a score of aggressive state officials, inquiries that offer the public a last best hope to get to the bottom of the housing scandal that has cost U.S. homeowners $6.6 trillion in home equity in the past five years and left 14.6 million Americans owing more than their homes are worth.

The $20 billion or so that the banks would pony up is chump change to them compared with the trillions that the Fed and other public agencies spent to bail them out. The banks were given direct cash subsidies, virtually zero-interest loans, and the Fed took $2 trillion in bad paper off their hands while the banks exacerbated the banking crisis they had created through additional shady practices, including fraudulent mortgage foreclosures.

Yet the administration has rushed to the aid of the banks once again and is attempting to intimidate the few state attorneys general who have the gumption to protect the public interest they are sworn to serve. As Gretchen Morgenson of The New York Times reported:

“Eric T. Schneiderman, the attorney general of New York, has come under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices. …

Read the rest here:

Posted by Mirela Monte, Myrtle Beach Real Estate (Buyers' Choice Realty) about 9 years ago

Believe it or not, this is an EXCELLENT idea.

You've got to get past that mentality of "the big guy makes money and the little guy gets screwed" because:
1. The litle guy isn't getting screwed
2. This is what the country as a whole really needs.

There are many thousands of homes in default, in foreclosure, already foreclosed on, listed as short sales, etc.  In fact, so many that it will take AT LEAST a decade for the market to sift through them.  Think about it, home ownership went from a historical norm of 65% to 69% due to loose lending.  Now those people lost their homes yet those additional homes that 4% bought or had built are still out there with no one capable of buying them. It will take a TON of time for those properties to be worked through. During this time, housing prices will continue to languish.  Sales will continue to languish as people won't want to put their house on the market knowing they're competing with all the foreclosures out there.

In a normal market (ie: pre-bubble), these deals would be picked up by individual investors on the courthouse steps... that kept them out of the general market and these investors would turn them into rental properties for the long haul or if they were suitable for a rehab, fix 'em up and sell them.  But there are so many out there now, that they totally overwhelm the few individual investors that do this.  On top of that, banks have tightened up lending so much, these investors can't get the financing that they once could get even way back in the 80's. So, it's that much harder for them to buy these distressed properties and take them off the market.

The Goldman's, Vulture Funds and other private investors are the ONLY source of capital to get these in the big batches that are needed.  And believe me that they're not going to send agents out to thousands of county courthouses around the country on a weekly basis to try to pick them up... too much work for the return on time and investment.  However, they will buy them this way where they can get many in one fell swoop.  Then they'll setup management companies to rent, fix-up, or otherwise handle these properties, or even possibly outsource that to local realtors.

The net result of this is:
1. The distressed inventory comes off the market, helping lift overly depressed prices.
2. People don't have huge competition and will be more open to selling their houses.
3. The banks won't have this huge portfolio of losses and will be more willing to take on new risk (ie: home loans to both homeowners and investors) now that they've gotten rid of the bad debt.  They'll loosen lending restrictions (not like 2005 where all you had to do was have a pulse, more like before the bubble when things were "reasonable")
4. Since lending will ease, more people will be able to buy homes.

So, this is good for:
Home buyers
Home sellers
Real estate agents (thru increased activity and outsourced work)
Housing Prices
The economy as a whole which benefits from more transactions

And YES, it is MOST beneficial to the Vulture Funds and their ilk, but to focus on that is very short-sighted.  If millions of people are able to get into homes that they can't now or sell homes that they can't now, believe me, they won't care how much the Vulture Funds profit from it.

And THAT is the big picture to keep in mind.

Posted by Cash about 9 years ago

Cash:  Of course it's an excellent idea.  An excellent idea for those who will profit from it. 

It gives me a cozy feeling that you entered your comment under the anonymous "cash"...

Posted by Mirela Monte, Myrtle Beach Real Estate (Buyers' Choice Realty) about 9 years ago
Yes, majority are kiolong for value at a good price and interest rate determines what price buyers are able to afford. Thanks for sharing with our online community, we’d love to hear about your market and its current activities. Feel free to use the community’s free forum, listings or post your service at our directory.
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