Bulk Sales of Foreclosed Single Family Homes

November 5, 2012  

Congressman Brad Sherman

5000 Van Nuys Blvd. - Suite 420

Sherman Oaks, CA 91403

Dear Congressman Sherman:

I live in the 27th Congressional District. I know you sit on the House Financial Services Committee and its Subcommittee on Capital Markets and Government Sponsored Enterprises, and I know that you also sit on the Subcommittee on Insurance, Housing and Community Opportunity.

Therefore, it seems appropriate that I bring a concern of mine to your attention.

My concern: While reading an article published in the Wall Street Journal on October 2, 2012 titled, New York Firm to Buy Fannie Foreclosures By Alan Zibel, I noticed the author mentioned the terms were the same for both of Fannie Mae’s first two ‘bulk sales’ (of foreclosed single family homes).  An outline of the terms of the deals was provided in the article (the last four paragraphs of the article).

It seems the terms of these first two bulk sales may lead to an uncertain, and very long payback period to for the GSE’s - and an even riskier and even longer payback period for any investor(s) that might be the source of funds for the managers of these deals. As long as the deal terms are fully-disclosed to the fund's (voluntary) investors their investments are their business.  

However, because of the history of Federal Housing Policy, and because of the history of the GSE’s, I believe deals such as these should be designed in a way which can actually be expected to produce rapid and less risky payment of the purchase price, than it appears the terms of the first two deals will produce.

I hope the committees you sit on will very closely review and monitor these two existing deals, and that you will have independent evaluators advise on, and audit, the structure and payment of future bulk sales of foreclosed single family homes. 

The bulk sale of foreclosed single family homes is a serious concern for homeowners, neighborhoods, and for local legislators. I believe the future financial success of these bulk sales is a critical element of the bulk sales strategy.

In the context of the GSA’s, it appears the terms of these first two deals were designed to move foreclosed homes off the GSE’s balance sheet, and to claim the 'sales agreement' as an asset.

Thank you very much for this opportunity to express my concern.


Bill George

Cc. Congressman Gary Miller

2349 Rayburn House Office Building

Washington, DC  20515


Background Information:  

(1) Private Equity’s Foreclosure Binge (& Purge) By Michael L Boyer pub. at Seeking Alpha, October 23, 2012 - at: http://seekingalpha.com/article/941291-private-equity-s-foreclosure-binge-purge#comments_header 

(2) The Institutional Home Buying Bubble By Bill George - Posterous - at:

2 responses
Was there any follow up to this letter. I came aware of this disaster in the making when I started hunting for a new apartment for my father and soon came to realize that almost all properties located within Chicago were not owned by traditional home owners. Rather most were owned and operated by private firms. Rental market has virtually exploded here with unprecedented increase in cost of rentals. At first I attributed this to a post recession trend of more and more folks opted to move back in the city. This may very well be true but the main driver of rental cost is the private equity firms. I can only image what will happen if and then they start dumping these properties back into the market.
Mr. Siddiqui, I have published a few documents about the Institutional buy to rent strategy on Posterous. Most of those documents include footnoted authoritative resources which you might fin interesting. You might also find other resources on the internet by doing key words searches on: "REO to Rent" and "Institutional buy to rent" and "buy to rent selling".