WASHINGTON, DC - In an effort to help stabilize the housing market and boost economic recovery, the Obama Administration today announced it is rolling out the first phase of a proposal championed by U.S. Senator Jack Reed (D-RI) to responsibly help turn foreclosed homes into rental properties in hard-hit cities.

The first phase of the Real-Estate Owned (REO) Initiative will be to identify qualified and suitable investors who have the resources and capabilities to invest responsibly.  Eventually, qualified investors may purchase pools of foreclosed properties with the requirement to rent the purchased properties for a specified number of years.  If implemented well, this pilot program could help create jobs, expand affordable rental housing to thousands of American families, and leverage private investment in foreclosed properties to stabilize communities and maximize neighborhood property values.

“The government can’t solve the foreclosure crisis on its own, and middle-class families can’t afford the price of inaction.  This is a smart way to get private capital back into the game and help pull the economy out of the housing downturn.  This is certainly an opportunity for investors, and, if properly implemented, a win-win for taxpayers,” said Reed, who has championed this idea since 2010.

Back in August, the Federal Housing Finance Agency (FHFA), U.S. Treasury Department, and the Department of Housing and Urban Development, put out a Request for Information on the program and received more than 4,000 submissions from interested stakeholders.

“There is clearly interest in this concept from the private sector.  I hope this pilot program can quickly get up and running so that we can simultaneously increase the supply of rental housing while reducing our foreclosure inventory.  Instead of letting these homes sit vacant and drag down neighboring property values, lets give families the chance to move in, pay rent, and be good neighbors,” noted Reed.

The FHFA announced that during the pilot phase, Fannie Mae will offer for sale pools of various types of assets including rental properties, vacant properties, and non-performing loans with a focus on the hardest-hit areas.  Investors interested in participating must “pre-qualify” with FHFA to establish eligibility to bid on transactions in the initial pilot phase as well as subsequent phases.