Investors eye REOs as a 'gold rush'

Investors eye REOs as a ‘gold rush’

NEW YORK – April 16, 2012 – Investors are pouncing on foreclosure bargains and then turning the properties into moneymaking rentals, which has some drawing comparisons to a “Gold Rush” of sorts.

Diane Gozza, the executive vice president of Integrated Mortgage Solutions in Houston, recently wrote in an article for National Mortgage News that investors are eyeing the properties similar to how those risk-takers did back in the 1848 California “Gold Rush,” who also had dreams of striking it rich.

In recent months, investors have been buying up investment properties in bulk at rock-bottom prices.

They have plenty to choose from: The government-sponsored enterprises (GSE), which includes Fannie Mae and Freddie Mac, own more than 200,000 single-family foreclosed homes, and banks own about 600,000 more. To help accelerate the “rush,” the Federal Housing Finance Administration recently launched a pilot foreclosure-to-rental program, offering investors the chance to bid on 2,500 foreclosure properties owned by Fannie.

But some housing experts, including the National Association of Realtors® (NAR), have argued that such REO-rental programs aren’t needed because investors are already flooding the market to buy up foreclosures, making a government intervention unnecessary. (Read “NAR: REO Rental Programs Largely Unnecessary.”

“Taking into account the enormous stockpile of REO properties currently held by the GSEs, the auction and bulk investment in REO to rental properties may indeed be the next gold rush,” Gozza writes. “Much in the spirit of the 1848 gold rush, there will be risks and tough lessons learned. But this private-sector initiative has the potential to be the catalyst for a housing market recovery.”

Source: “Tapping into the Next ‘Gold Rush,’” National Mortgage News (April 10, 2012)

 
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