The Federal Housing Finance Agency announced the first pilot sale of real estate owned (REO) properties for conversion into rentals on February 27. The announcement provides further details on the Administration’s REO-to-rental initiative, which was officially announced as part of the President’s housing plan on February 1 (see Memo, 2/3).

The pilot sale involves REO single-family properties held by the government sponsored enterprise Fannie Mae. The pilot will include properties in the following metropolitan areas: Atlanta, GA; Chicago, IL; Florida- Central and Northeast; Florida- Southeast, Florida- West Coast; Las Vegas, NV; Los Angeles/Riverside, CA; and Phoenix, AZ. According to the summary of available assets provided by FHFA, the majority of the units are renter-occupied, not vacant.

Since the February 1 announcement, investors have had the opportunity to submit an application to prequalify for the opportunity to participate in the program, and still may do so. Further details about the sales announcement will be sent to prequalified investors. According to FHFA in its press release, “investors who post a security deposit and sign a confidentiality agreement will gain access to detailed information about the properties. At that stage, interested investors must submit a comprehensive application, which will be reviewed by an outside firm. Only investors who are qualified through this rigorous process will be eligible to bid.”

NLIHC submitted comments in response to a request for information (RFI) released by FHFA, HUD, and the Department of the Treasury on how a REO-to-Rental program could work (see Memo, 9/16/11). The RFI mentioned “support for affordable housing” as a possible objective of a REO-to-Rental Program. NLIHC recommends in its comments that a portion of the REO stock be used to increase the supply of housing affordable to extremely low income people. The available details of the pilot sale do not indicate that there will be an affordability component to this first stage of the program. It is possible that affordability will be a component of future pilots or stages of the program, although there has been no indication from FHFA that this will be the case.

FHFA’s press release on the pilot sale is available at: http://www.fhfa.gov/webfiles/23403/REOPR22712F.pdf

The preliminary summary of available assets is available at: http://www.fhfa.gov/webfiles/23402/FNMASFRREO2012-1SummaryofAssets.pdf

The prequalification application is available at: http://d13elqjcd61okc.cloudfront.net/content/pdf/Bidder_Qualification_Application_2012-1.pdf