Minnesota Real Estate Investors Association, Inc.

Minnesota Real Estate Investors Association, Inc.

Leave it to the Government to Create a Double Standard


Yet again, leave it up to the government to demonstrate their ability to legally create a double standard. In many if not most states, it is illegal for investors to buy a property from someone in Foreclosure and then rent it or sell it back to the homeowner. This type of transaction is called Equity Stripping when a nongovernmental investor does it, but according to Freddie Mac, it must be considered compassionate.

According to the Finance and Commerce legal paper in Minneapolis, MN, Freddie Mac announced a new policy that would allow some borrowers the ability to stay in their properties after the foreclosure process if they can demonstrate the financial ability to make a rental payment. Freddie Mac s reasoning is that it is better for overall property values and neighborhoods if the properties were occupied rather than vacant.

While that may seem like a worthy goal, it is simply illegal for the rest of us to do the exact same thing, so we now have a new competitor in the real estate market, Government. And besides, if they had a clue, they would realize that by keeping the previous homeowners in the property as renters, would result in a lower overall property value and it will take much longer for investors to purchase the property and do the necessary renovations on the property that would significantly increase property values and the overall neighborhood values.

Fortunately I do not think this will make up a huge portion of the foreclosure market, but it will impact a certain percentage of it. One of the side benefits that I do think merits consideration is the investor properties that are foreclosed on. In those properties, there usually is already a tenant in place and they will have the ability to stay there and rent from Freddie Mac. I think that is a good thing since the renter was not the one responsible for the foreclosure in the first place.


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