Mortgages

Fannie and Freddie to World: Uh, You Guys Got Any Better Ideas?

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In case you haven’t noticed, the government owns a ton of houses these days. At last count Fannie Mae, Freddie Mac and the Federal Housing Administration own 248,645 homes of all different sizes and conditions. About 70,000 of those are currently on the market, says Stephanie Johnson, spokeswoman for the Federal Housing Finance Agency, which oversees the other three.

So here’s the question: What do we do with all the rest? Apparently, the government has no idea. In a press release issued Wednesday, the agencies asked the public for ideas on how to handle all these empty houses, known in the business as “real-estate owned” properties.

“(T)he Enterprises seek input on possible pooling of REO properties in situations where such pooling, combined with private management, may reduce Enterprise credit losses and help stabilize neighborhoods and home values,” Edward J. DeMarco, the acting director of FHFA, said in a press release.

There are two different ways of looking at this plea. On the one hand, this may be a mark of just how bad our nation’s housing situation has become: The people who essentially run the real estate market now (the overwhelming majority of mortgages right now are either sold or insured by FHA, Fannie and Freddie) are asking us for ideas.

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That may be particularly galling to some, since Fannie and Freddie helped create the current economic mess by trading in mortgages they knew were loaded with teaser introductory rates, balloon payments, no income disclosures, and other risky features that cause so many loans to fail, according to the Financial Crisis Inquiry Commission.

The less outraged way of looking at this, as told to Credit.com by an inside source at FHFA who couldn’t say it on the record, is that the mortgage giants are receiving lots and lots of ideas from business people and nonprofit leaders for what to do with this massive backlog of empty houses. But until this new effort, the agencies had no way to process all those ideas and see if any of them have merit.

We at Credit.com know some people with innovative ideas on how to treat empty houses. As we covered last month, a few people are returning to the idea, more popular during the 1970s an ’80s, of squatting in empty houses and reclaiming them for homeless people.

[Related Article: Squatters Unite! McMansion Squatter Becomes Part of National Movement]

“We have a lot of ideas” for what to do with the empty houses, says Robert Robinson, co-founder of Take Back the Land, a group that advocates people taking over foreclosed properties. “How about the people sitting homeless in the streets? I bet they would appreciate houses.”

Robinson, and everybody else with creative ideas, can submit their proposals to REO.RFI@fhfa.gov. The deadline is Sept. 15.

Image: Bill Ward, via Flickr.com




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