President Barack Obama announced a broad plan to help restore housing markets and stabilize communities on February 1. The plan, among other provisions, calls for a $1 billion capitalization of the National Housing Trust Fund (see article elsewhere in Memo).

The plan includes a number of proposals to assist homeowners and renters, some requiring congressional approval and some that do not. It is expected that the provisions not requiring congressional approval will be implemented by the Administration in the near future.

Among the provisions of the plan that do not require congressional approval, the President announced the expansion of the Home Affordable Mortgage Program (HAMP) to include properties that are occupied by renters or will be available for rent, saying that “single-family homes are an important source of affordable rental housing, and foreclosure of non-owner occupied homes has disproportionate negative effects on low-and moderate-income renters.” The HAMP program allows for principal reduction modifications for homeowners who owe more on their mortgage than their homes are worth.

Also included in the plan is the launch of an REO-to-rental pilot program for single-family real estate owned (REO) properties. The announcement comes six months after the Federal Housing Finance Agency (FHFA), HUD, and the Department of the Treasury released a Request for Information on how the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and the Federal Housing Administration, could convert a portion of their single-family REO portfolio into rental housing (see Memo, 9/16/11). The REO-to-rental program does not require any congressional action to be implemented.

“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 in the near-term,” says FHFA in its press release announcing the pilot program. FHFA has made available on its website pre-qualification forms for investors who are interested in participating in pilot transactions. FHFA also indicated in its press release the possibility of future efforts to improve REO sales to homeowners and small investors.

NLIHC submitted comments in response to the RFI recommending that a portion of the REO-to-rental properties held by the GSEs and FHA be made available to extremely low income households, including people experiencing homelessness and people with disabilities. NLIHC also recommended that National Housing Trust Fund (NHTF) dollars be paired with REO sales to assist with operating and rehabilitation expenses. The pilot announced on February 1 does not include any income targeting specifications, nor does it provide resources that will help make some of the properties affordable to low income households.

It is expected that there will be five pilot REO-to-rental programs, although no further information is available on the shape that the future pilots might take. Administration officials indicated on a stakeholder phone call that further details on the first pilot will become available in the next two to three weeks, and that the additional pilot programs will be rolled out in the next six months. NLIHC will continue to advocate for a portion of the properties included in the pilot programs to be targeted to extremely low income households. 

The President also proposed the expansion and streamlining of refinancing options for homeowners who are current on their mortgage payments. However, this component of the plan would require Congressional approval. It is expected that Republicans in Congress will express concern with the proposed offset of additional fees levied on financial institutions.

NLIHC’s comments in response to the RFI are available at: http://nlihc.org/doc/NLIHC_REO_Comments_2011.pdf

NLIHC’s press release in response to the President’s housing plan is available at: www.nlihc.org/press/releases/2-1-12

Information on the REO to rental pilot is available at: www.fhfa.gov/webfiles/23196/REO2112F.pdf