The California Association of Realtors today said the planned bulk sale of about 500 Fannie-Mae owned homes that have been foreclosed upon in Los Angeles and the Inland Empire would hurt the local housing market, but the Federal Housing Finance Administration was moving ahead with the plan.
“We are disappointed that Fannie Mae and the FHFA fail to understand that this initiative will harm the communities in which it will be implemented and are going forward with this ill-conceived plan,'' CAR President LeFrancis Arnold said.
“Moreover, not only are Fannie Mae and FHFA moving forward with the plan, they are refusing to disclose any details, such as property locations, final property count, sales price, or names of winning bidders.''
According to CAR, the FHFA, Fannie Mae's conservator, has announced that winning bidders in the foreclosure auction had been picked, with sales expected to close in the third quarter.
In July, Fannie Mae created a limited liability corporation called SFR 2012-1 US West LLC to receive the foreclosed properties from Fannie Mae.
It is unclear if the winning bidders will get the LLC or only a share, which would split ownership between Fannie Mae and the winning bidders. That prompted CAR to ask the FHFA to disclose how the deal will shake out. It filed a Freedom of Information Act request for answers.
"We are also greatly concerned that the FHFA used extremely outdated market data, perhaps as old as 2011, to determine property valuations,'' Arnold said.
"Because the transactions are only now in the process of closing, these dated valuations will drag down the Inland Empire's home prices, which have shown strong signs of stabilization.
"Additionally, because of this price discrepancy and the very nature of bulk sales, we believe Fannie Mae is assured to not receive fair market value for the properties, thereby saddling taxpayers with their loss.''
Arnold said investors did not need government incentives to buy properties at a discount and that savvy buyers realize that the California market represents a great opportunity.
According to CAR, the targeted properties are in markets that have largely stabilized over the past three years, including the Inland Empire, where listings are slim but demand strong, with foreclosure listings selling in less than 30 days.
The long-run average for unsold inventory in the Inland Empire is a 5- to 6-month supply but now stands at 3.1 months in Riverside County and 3.8 months in San Bernardino.
In May, Rep. Gary Miller, R-Brea, and colleagues introduced a bill aimed at stopping FHFA bulk sales in California to institutional investors.
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