Unstructured Finance

FHFA is not on an REO speed wagon when it comes to full disclosure

By Matthew Goldstein

The FHFA continues to reveal as little as possible about its pilot project of selling foreclosed homes to private investors in bulk sales.

With surprisingly little fanfare, the Federal Housing Agency announced this week that Pacifica Companies, a little-known San Diego investment firm, is the first company to emerge as the winner in the pilot project. Pacifica is buying 699 single-family homes that are part of Fannie Mae’s REO portfolio in Florida.

In the coming weeks, FHFA says it will announce the winning bids for bulks sales of REO homes in California, Arizona and Illinois as part of the much-hyped pilot project to sell 2,500 foreclosed homes. The agency that regulates Fannie and Freddie Mac says there will be no winning bid for some 541 homes it was planning to sell in Atlanta. The agency didn’t offer an explanation.

The deal with Pacifica is structured as a joint venture with Fannie that will distribute the cash generated from renting out the homes and eventually selling them three years down the road. The San Diego company is paying $12.3 million for its equity interest in the joint venture that values the portfolio at $78.1 million, or 96 percent of the appraised market value for the single-family homes. In the deal, Fannie will retain considerable equity in the joint venture and collect up to $49  million in revenue before the deal terms become more favorable to Pacifica–which also collects a separate asset management fee.

The deal structure is a bit complicated but FHFA is not saying anything more about the process. A spokeswoman for the FHFA says the agency has no plans to reveal the number of bids it received for the Florida properties or provide additional details on Pacifica’s bid or how it intends to manage the homes as rentals.

Will FHFA opposition to principal reductions boost eminent domain efforts?

By Matthew Goldstein and Jennifer Ablan

There’s nothing surprising about FHFA head Ed DeMarco’s decision to nix the idea of writing down some of the debt owed by cash-strapped homeowners on mortgages guaranteed by Fannie and Freddie. DeMarco, whose agency regulates Fannie and Freddie, has been a consistent opponent of principal reductions–something we pointed out last October in our story on the need for a “great haircut” on consumer loans and including student and mortgage debt to stimulate the economy.

But DeMarco’s renewed opposition comes at a time that there is a growing consensus that something needs to be done on the housing front to get the U.S. economy going, as opposed to simply churning along at the current anemic rate of growth. More and more economists are saying that reducing mortgage debt will not only reduce foreclosures, it will give ordinary Americans more money to spend on goods and services.

It doesn’t take an MBA from Harvard to know that when people have spending power it translates into more demand and that usually prompts employers to hire more people to fill that demand.

And the winner is….

By Matthew Goldstein

Four months ago, the regulator for Fannie Mae announced with much fanfare that it would accept bids for 2,500 single-family homes owned by Fannie Mae. The process has drawn a lot of interest from hedge funds, private equity firms and other big money players, but it’s been a slow one.

However, it appears the Federal Housing Finance Agency has finally come up with a date for qualified bidders to submit bids for the deal. And that date is, (drum roll) June 7, say people familiar with the situation.

There’s been a lot of speculation about which firms will bid for these Fannie-owned homes. My incredibly well-sourced colleague Jenn Ablan and I have been on this from the start and will endeavor to find out as quickly as possible the names of some of the biggest players entering the market for foreclosed homes. Stay tuned.

Wall Street gold rush in foreclosed homes heads north

By Matthew Goldstein and Jennifer Ablan

The state of Alaska is looking to cash in on the growing demand for renting out foreclosed single-family homes.

A spokeswoman for the $40 billion Alaska Permanent Fund recently approved a $400 million investment with a California-based company that specializes in buying foreclosed homes and renting them out. Laura Achee said the fund is still negotiating the terms of the deal with American Homes 4 Rent LLC.

The Alaska fund, which is managed by a state-owned corporation, is believed to be one of the first public investment arms to sink money into the market for foreclosed homes.

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