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Lawmakers Say GSEs’ REO Rental Initiative Isn’t for California

Nineteen members of California's congressional delegation want to keep Fannie Mae's and Freddie Mac's ""for rent"" signs outside their state's borders.

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Led by Congressman Gary Miller (R-Brea), the group sent a letter to Edward DeMarco, acting director of the ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA), petitioning him to exclude homes in California from the pilot program of the REO Initiative, which aims to sell off REOs owned by the GSEs and HUD in bulk to institutional investors who will turn the properties into rental homes.

According to the California congressmen, the impact of the program would only serve to further depress California's housing market, in addition to raising costs for taxpayers.

Of the 2,490 Fannie Mae-owned REOs up for sale as part of the pilot, more than 600 are located in Los Angeles and Riverside counties, according to the ""California Association of Realtors"":http://www.car.org (C.A.R.).

C.A.R. issued a statement applauding the state lawmakers for voicing their opposition to the REO-to-rental push. The

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state Realtor group said it doesn't believe the California market will see any benefits from the pilot program because housing inventory throughout the state is ""extremely low and demand is high.""

Homebuyers in most of California's markets are experiencing multiple offers, including for distressed and foreclosed properties. According to C.A.R. data, sales of bank-owned homes are closing in an average of less than 60 days â€" and often above the list price â€" without government intervention.

""We commend the California congressional delegation's letter to Mr. DeMarco,"" said LeFrancis Arnold, C.A.R. president. ""They clearly understand that this program may be a viable solution in states where there is a large inventory of unsold foreclosures. However, carrying out this plan in California would potentially further delay a housing recovery and, ultimately, result in greater losses for the taxpayer.""

The 19 California lawmakers also played on DeMarco's own sense of responsibility to upholding the GSEs' conservatorship and safeguarding their financial state.

""We are concerned that including California counties in this initiative is in direct conflict with your duty as conservator to preserve and conserve the company's assets,"" their letter stated.

According to the state lawmakers, in California, there is ""no question"" that disposing of foreclosed properties through bulk sales will yield a lower return for the GSEs, and ultimately taxpayers, than traditional disposition methods.

""This means that such a program will increase losses to the taxpayer and GSEs,"" the letter concludes.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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