Riverside County supervisors on Tuesday expressed support for congressional legislation intended to halt the bundled sale of hundreds of distressed properties in the Inland Empire to investors in a federally sanctioned move to convert foreclosed homes into rental houses.
"These homes would be sold to investors, who quite probably would be offshore, creating again the same issue that helped create the mortgage mess of 2007," Board of Supervisors Chairman John Tavaglione said. "Homes would be sold in a bundle situation to absentee owners. They won't be in our community."
The board voted 4-0 in support of HR 5823, introduced by Rep. Gary Miller, R-Diamond Bar, who is seeking to stop all bulk sales of repossessed properties in Southern California by the Federal National Mortgage Association - - better known as Fannie Mae -- under the direction of the Federal Housing Finance Agency.
Fannie Mae has been under federal conservatorship since the 2008 financial meltdown.
HR 5823, under review in the House Financial Services Committee, is also supported by the California Association of Realtors and the Inland Valley Association of Realtors.
CAR has criticized the secretive nature of the purchase agreements and filed Freedom of Information Act requests asking for documents that would disclose how buyers were chosen and other details.
According to Tavaglione's office, under the FHFA proposal, institutional investors would take possession of the foreclosed homes and turn them into rentals for three to five years.
"This is taking away opportunities for local investors ... in our communities to buy homes and resell them to individuals interested in homeownership," the chairman said.
According to CAR, the sale of some 500 Fannie Mae-owned properties in Riverside, San Bernardino and Los Angeles counties is expected to close at the end of the current quarter. The government created a limited liability corporation called SFR 2012-1 US West LLC to receive the foreclosed properties from Fannie Mae.
"We are greatly concerned that the FHFA used extremely outdated market data, perhaps as old as 2011, to determine property valuations," said CAR President LeFrancis Arnold.
"Because the transactions are only now in the process of closing, these dated valuations will drag down the Inland Empire's home prices, which have shown strong signs of stabilization," Arnold said."Additionally, because of this price discrepancy and the very nature of bulk sales, we believe Fannie Mae is assured to not receive fair market value for the properties, thereby saddling taxpayers with their loss."
The board directed the Executive Office to help drum up support for HR 5823 using the county's federal and state lobbyists. Tavaglione hoped the Coachella Valley Association of Governments, all local chambers of commerce and each of the 28 cities within the county would publicly back the legislation.