Feds may turn government-owned foreclosures into rentals

By Derek Kravitz, Associated Press

WASHINGTON — The Obama administration may turn thousands of government-owned foreclosures into rental properties to help boost falling home prices. The Federal Housing Finance Agency said Wednesday it is seeking input from investors on how to rent roughly 250,000 homes owned by government-controlled mortgage companies Fannie Mae and Freddie Mac and the Federal Housing Administration. All of the homes are foreclosures.

The U.S. government rescued the two mortgage giants in September 2008 and has funded them since the financial crisis. Fannie and Freddie own or guarantee about half of the nation’s mortgages and nearly all new mortgages.

Converting the homes into rentals may reduce “credit losses and help stabilize neighborhoods and home values,” said Edward DeMarco, acting director of the Federal Housing Finance Agency, which oversees Fannie and Freddie.

Homes in foreclosure sell at a 20 percent discount on average, which can hurt prices of surrounding homes. It also might meet the growing demand for rentals. Since the housing meltdown, nearly 3 million households have become renters. At least 3 million more are expected by 2015, according to census data analyzed by Harvard’s Joint Center for Housing Studies and The Associated Press.

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