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WASHINGTON (Reuters) - The regulator for mortgage finance companies Fannie Mae and Freddie Mac said on Wednesday investors could now sign up to pre-qualify to bid on foreclosed properties held by the government-controlled firms.
Those investors meeting the qualifications set by the Federal Housing Finance Agency could purchase homes and then convert them into rental units under the new program. They would be required to use the properties as rentals for a specific number of years.
Government-run Fannie Mae, Freddie Mac and the Federal Housing Administration own a large portion of the country's foreclosed properties. As that inventory is expected to swell, the federal program is aimed to clear the backlog of distressed properties that has flooded the market and depressed prices, while at the same time meeting the increased demands of renters.
The regulator said it will announce the first transaction during a pilot phase of the so-called REO initiative in the "near term." Fannie Mae will offer for sale pools of various types of assets in the first pilot program, including rental properties, vacant properties and non-performing loans with a focus on the hardest-hit areas.
"This is an important step toward increasing private investment in foreclosed properties to maximize value and stabilize communities," said FHFA acting director Edward DeMarco.
Later Wednesday, President Barack Obama will announce a package of proposals to help the ailing housing market, including a way to help more borrowers refinance at record low borrowing costs.
Reporting by Margaret Chadbourn; Editing by Andrea Ricci