The Biden government is trying to give individual owners, families, and nonprofits more opportunities to buy homes that have been foreclosed before big investors snatch them.
The changes to the guidelines for the sale of forced housing with government-sponsored mortgages are part of a plan to “create, maintain and sell” 100,000 affordable homes for homeowners and renters over the next three years.
In addition to reducing sales of foreclosed property to investors, the Biden government will expand federal programs that help finance affordable housing construction and work with state and local governments to reverse exclusive zoning policies that restrict new home construction.
“These measures will expand access to critical capital for government housing finance agencies, empower local communities to build more affordable housing with the historic investments of the US rescue plan, and equitable housing policies, such as Fudge said in a statement.
Wednesday’s announcement gets several federal agencies to grapple with affordable housing issues while Congress debates the Biden government’s more ambitious “Build Back Better Agenda,” which aims to provide investments that will help build and refurbish more than 1 million affordable housing units.
To do that, Congress would need to expand the Low Income Residential Property Tax Credit (LIHTC) and allocate more funding to the HOME Investment Partnerships program, Housing Trust Fund, and Capital Magnet Fund.
Bob Broeksmit, President and CEO of the Mortgage Bankers Association, welcomed the news.
“The lack of supply is a huge problem and the HUD and FHFA should administratively do all they can while Congress considers larger initiatives,” Broeksmit said. “MBA looks forward to continuing to work with government, Congress, and all other stakeholders to resolve supply bottlenecks and ensure government programs adequately complement private capital to serve both tenants and homeowners.”
In a recent report, the National Association of Realtors concluded that housing production has slowed over the past two decades, falling below an estimated 5.5 million new units from 2001 to 2020. NAR estimates that home builders will need to build more than 2 million new housing units per year for the next decade to fill the void.
Meanwhile, the Biden administration is developing guidelines that include an exclusive offer period during which government agencies, nonprofits, and owner-occupier buyers will be invited to bid on the sale of FHA-insured foreclosures. To be offered to investors.
Second Chance Claims Without Conveyance of Title (CWCOT) sales, which allow credit service providers to sell foreclosed properties directly to a third party without transferring it to HUD, are the most common way FHA foreclosures are sold today.
“This sales method lowers the cost of taxpayers, but too often real estate is being sold to large investors who either turn it around for profit or rent it out,” the White House said on a fact sheet detailing the proposed changes. “Owners and nonprofits who are more likely to need funding and are less familiar with the CWCOT program often do not have a fair chance of buying these properties.”
According to a recent analysis by Attom Data Solutions, institutional investors saw the highest proportion of home purchases in six years in the second quarter of 2021. Attom reported that institutional buyers made the largest share of recent sales in Mississippi (11 percent), Arizona (10.4 percent), Georgia (8.8 percent), Nevada (7.6 percent), and North Carolina (6.7 percent) ) made out. Last year, investors were most interested in markets where prices were low and populations were growing, according to a report from CoreLogic.
The Biden government also wants to give owners a better chance of buying homes repossessed by HUD, Fannie Mae, and Freddie Mac.
Currently, potential owner-occupiers and non-profit organizations are getting an exclusive “first look” at these properties, a 10 to 20 day period during which investors cannot bid on them. FHA, Fannie and Freddie will extend these first-look periods to 30 days, the White House said.
Home buyers can search HUD owned properties at HUD Homes. To find homes in Fannie Mae’s REO inventory, visit HomePath.com. Freddie Mac foreclosures are listed on HomeSteps.com.
Forbearance programs, which allowed homeowners with government-sponsored mortgages to suspend monthly payments during the pandemic, will expire in the next few months. As of mid-August, 3.25 percent of mortgage borrowers, or 1.6 million homeowners, remain in forbearance programs that allow them to suspend their payments.
But all in all, HUD, Fannie, and Freddie only have a little over 12,000 single-family homes in their “real estate” (REO) portfolio.
At the end of July, a moratorium on the exclusion of foreclosure proceedings against homeowners with government-secured mortgages expired. However, before foreclosures are initiated against borrowers who are 120 days in arrears with their payments, federal regulators expect loan service providers to reach out to borrowers and give them the opportunity to apply for assistance.
Black Knight data shows that only 145,360 homes were in any stage of the foreclosure process as of June, compared to a high of 2.3 million active foreclosures in December 2010, at the height of the last real estate crisis.
Email Matt Carter