The Fair Housing Federal Agency [FHFA] Back in the Spotlight

     The Fair Housing Finance Administration [FHFA] seems to be in the spotlight an awful lot of late.  Riding the highs generated from their August 21 press release with several welcomed short sale changes, the FHFA, seemingly in the same breathe, announced it will move forward as-planned with what is being regarded as a locally harmful initiative - their REO bulk sales plan.  The proposal calls for the immediate selling of 500 Fannie-Mae owned foreclosed [REO] homes in both Los Angeles and Inland Empire areas.  What’s not sitting well with the public is the lack of transparency with which the FHFA plans to carry out this bulk sales plan.  As C.A.R. President C.A.R. President LeFrancis Arnold noted in her August 24 newsletter, the FHFA aims to act out this plan “in a secretive manner by not disclosing any details, such as property locations, final property count, sales price, or names of winning bidders.” 

     LeFrancis’s and the C.A.R.’s disappointment with the FHFA is no secret.  In fact, the C.A.R. responded on August 22 by filing a request under the pretense of Freedom of Information Act to get specifics on the transaction details. 

     Analysts feel this plan will harm an already-delicate and uncertain recovery process.  For starters, bulk-selling REO’s will restrict an already-low inventory index.  The long-run average for unsold inventory in the Inland area is a 5- to 6-month supply, but currently stands at 3.1 months in Riverside County and 3.8 months in San Bernardino. Additionally, the FHFA’s plan will pump less than market prices into the equation at an accelerated rate.  Historically REO unloading negatively impacts market price levels, so this move is perceived to hinder the price gaining trends we’ve been experiencing of late.   

     Not to throw the FHFA entirely under the proverbial bus, as it is still only a few days out since it took strides in their attempt to provide better framework for Fannie and Free short sales.  The proposed changes are to go into effect November 1, 2012, which at least on paper are designed to better streamline the review process to enhance overall efficiency and market productivity. With regard to the most current announcements for the REO bulk sales plan, I don’t dispute that the high Fannie REO count may make it very difficult for the FHFA to know exactly what to do with them.  What gives the C.A.R. a legitimate gripe against the FHFA is the secrecy with which it plans to operate.  In an industry that dismissed the phrase caveat emptor (or buyer beware) many years ago, to instead preach “Disclose! Disclose! Disclose!”, their intentional disregard for transparency is tough to figure.