Foreclosures: Uncle Sam and His 248,000 Homes

Bloomberg Businessweek reports:

For sale or rent by distressed owner: 248,000 homes. That’s how many residential properties the U.S. government now has in its possession, the result of record numbers of people defaulting on government-backed mortgages. Washington is sitting on nearly a third of the nation’s 800,000 repossessed houses, making the U.S. taxpayer the largest owner of foreclosed properties. With even more homes moving toward default, Fannie Mae (FNMA), Freddie Mac (FMCC), and the Federal Housing Administration are looking for a way to unload them without swamping the already depressed real estate market.

Trouble is, they haven’t figured out how to do that. The government admitted as much in August, when Fannie, Freddie, and FHA issued a joint plea to the public for ideas about how to solve the problem. (Give it your best shot: You have until Sept. 15 to submit ideas to reo.rfi@fhfa.gov.) “They’re stuck,” says Karen Shaw Petrou, managing partner of Federal Financial Analytics, a Washington-based consultant that advises banks and other clients on government policy. “They don’t know what to do.”

It's time to separate housing from state.