Benefits Of Freddie Mac's New Plan To Boost Housing Sector Debatable

Wednesday, October 03, 2012 06:49
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Benefits Of Freddie Mac's New Plan To Boost Housing Sector Debatable

Tags: economy | mortgage debt | U.S. economy

Freddie Mac is trying to augment the housing market’s recovery by making loans to investors wishing to buy foreclosure properties and rent them out.

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The Federal Housing Finance Agency (FHFA) doesn’t like the plan. Its cheap debt offerings would compete with banks in attracting people wishing to buy foreclosure homes. It would also increase the government’s role in the real estate sector.
 
Fears are high that Freddie Mac’s plan would crowd out the private sector in providing funding.
 
The agency’s focus is on established investors with property management experience instead of investors looking to make bundled purchases of foreclosed homes.
 
Proponents say the funding would provide great economic stimulus and would result in a huge land grab. The program would offer short-term funding for purchasing foreclosed homes and a longer-term facility that would enable some buyers to build inventory.
 
The purpose of the plan is to provide liquidity to the rental market. The plan garnered the Treasury Department’s approval over the summer.
 
Banks have been looking into providing rental financing. Some economists say that limited supply of homes available for purchase is a larger roadblock for the housing sector than available financing.
 
Although the housing sector is improving, banks seem to still be less than proactive about lending. As the market gains strength, banking interest may improve.

 

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