The HS Dent Financial Blog

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You Are Now The Biggest Single Family Landlord in the US

Fannie and Freddie have a new program - when you default on your mortgage, you can trade in your mortgage through foreclosure and in return get a rental agreement.  Through rapid deterioration of the housing market and now prime loans, Fannie Mae and Freddie Mac have found themselves with around 100,000 homes that they own.  What to do with them?  Flooding the markets with excess inventory seems like a bad idea, so they chose instead to go into the landlord business.  The WSJ reports that the program will charge “market rents,” which are lower than the previous mortgage.  That seems obvious.  But it also brings up an obvious question - if rents are lower than the old mortgage payment, are the rents also lower than a mortgage based on current sales prices?

What the entities are doing is betting on an improvement in the housing market, waiting to sell inventory when things are better.  These are the same entities that told us in no uncertain terms in the summer of ‘08 that they needed no government funds, and are now $100 billion into our pockets as taxpayers, most likely needing more in the months ahead.  Having these entities become real estate speculators doesn’t make me feel better.