"It's a club. And you ain't in it!"

[Turbineguy]

A Huge Housing Bargain -- but Not for You

NEW YORK (RealMoney) -- The largest transfer of wealth from the public to private sector is about to begin. The federal government will be bulk-selling the massive portfolio of foreclosed homes now owned by HUD, Fannie Mae and Freddie Mac to private investors -- vulture funds.

These homes, which are now the property of the U.S. government, the U.S. taxpayer, U.S. citizens collectively, are going to be sold to private investor conglomerates at extraordinarily large discounts to real value.

You and I will not be allowed to participate. These investors will come from the private-equity and hedge-fund community, Goldman Sachs(GS_) and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction.

Read more:

http://www.thestreet.com/story/11224917/1/a-huge-housing-bargain--but-not-for-you.html

[gateley]

1. Who are they gonna sell the houses to? nt

[Turbineguy]

2. Investment banks,

hedge funds, sovereign wealth funds.

[gateley]

3. And, who are THEY going to sell the houses to? nt

[Turbineguy]

6. They are not.

They are going to rent them out. When the inventory drops and prices go back up, they will start selling at huge profits.

[gateley]

10. Well there goes my glee in them getting stuck with white elephants.

They always come out on top.

[Trillo]

11. Why would they sell them?

Rents are near to the monthly cost of a mortgage, sometimes somewhat higher, at other times, somewhat lower (this has been true in Southern California for my entire adult life). Thus, there would never be a motive to for corporate deep pockets to sell them. They would simply raise the rent as market prices rise. By removing homes from the market, prices for any remaining homes for sale would likely rise due to reduced supply, thus allowing them to raise rents.

There would be few motives that I can see for deep pockets to ever sell them, barring bankruptcy or some such financial calamity. In that case, large blocks of homes would likely be auctioned off to other deep pockets, structured in such a way they never would enter the "single family home for sale" ever again.

[Turbineguy]

13. Very true

but we are talking about people who are used to dealing with more liquid assets than real estate. I think they will be looking to get out of these investments in 5 or so years. The only reason I see for them to do this is the leverage.

[jwirr]

9. These guys already own their own foreclosed houses.

[WhiteTara]

4. WTF! These guys are such real bastards!

Since then, of course, the systemic collapse of housing has engulfed all of the major urban coastal regions of the U.S., as well as Phoenix and Las Vegas, and caused the homes owned by Fannie Mae and Freddie Mac, which are now under the direct control of the U.S. Treasury Department, to spike as well.

Even before this crisis occurred, HUD, i.e. the U.S. government, was the largest improved real estate owner in the world, because of its portfolio of foreclosed homes, which is classified as "real estate owned" (REO). The entire massive HUD REO Portfolio is quietly managed by a handful of private firms already, a group listed as Management and Marketing Contractors.

These M&M companies are principally owned by and employ former high-ranking government officials from the various germane agencies -- the Treasury, HUD, FHA and others. And they will provide the necessary access to the current government employees who are tasked with bringing this program to fruition. Once the privatization is complete, those government employees will move from their positions, and many will take up new employment at one of the M&Ms or the new vulture funds.

I am not currently aware of any way for retail investors to participate in this process.

It is probable, however, that once the privatization has occurred and the properties are generating rental income for the investors, the initial investors will cash out by forming real estate investment trusts (REITs), real estate operating companies (REOCs) or limited partnerships (LPs) that will be made available to retail investors.
****

Calling Rachel! Calling Keith! Calling Lawrence! Stop this! We own these houses and we should be reaping the benefits by turning them into low income housing and revitalizing our cities! The multi headed hydra of greed.

[WingDinger]

5. As Rick Santelli so clearly stated, the well to do DESERVED to scoop up all the belongings of

those in trouble. This is the REASON for the cyclical nature of recessions and why the rich and powerful will not change the system or smooth out the business cycle. This is the reason for capitalism. They take back all they gave during good times. As it should be.

[The Backlash Cometh]

7. I remember the last time they did this.

Lawyers and investors went drunk with power.

[BadgerKid]

8. R.I.P. George Carlin. n/t

[chill_wind]

12. And mass media will duly play their role in the deception

In reality, the RFI is a way for the members of Congress to find out if they can get away with bulk-selling these homes to private companies without incurring the wrath of their constituents, taxpayers and former owners of the properties.

Assuming taxpayers don't push back, the next step will be to issue a Request for Proposals (RFP). The RFP will be the bid and plan for these homes by investors.

The way to keep taxpayers from pushing back is to structure the RFI so that the real intention, the bulk sales, is masked by feel-good goals, such as stabilizing neighborhoods and increasing the supply of rental properties.

As intended, the mass media are playing their part in classic style. Every major newspaper in the U.S. has run articles discussing the plan as a rental conversion, allowing readers to assume that Fannie, Freddie and HUD will be renting the properties directly to families who need housing. And although there is an allowance for these kinds of rentals, it is a minor political facade to the obvious true goal of bulk-sale privatization of these homes.

[Jester Messiah]

14. I would burn my house before I allowed them to take it. [nt]