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Moderator:

Suzanne Mistretta, Senior Director, Fitch Ratings

Panelists:

Thomas Hiner, Partner, Hunton & Williams LLP
Youriy Koudinov, Director, TIAA-CREF
Leo Pareja, Director of Valuations, Blackhawk Consulting LLC
Dash Robinson, Managing Director, Wells Fargo Securities
Ryan Stark, Director, Deutsche Bank

Policymakers and market participants have been exploring new options for selling foreclosed properties in an attempt to promote private investment in local housing markets and support home price stability. One such measure is to transition real estate owned (REO) properties, owned by banks, securitization trusts and the GSEs, into productive rental units.  This model received national attention last year, when several government agencies supported its potential use in dealing with foreclosed properties that weigh on the housing market.  Then, on February 1, 2012, the Federal Housing Finance Agency (FHFA) announced its REO Initiative, which allows qualified investors to purchase pools of foreclosed properties with the requirement to rent them for a specified number of years.  This effort, in addition to similar initiatives currently being considered by many private market participants, have put the “REO-to-Rental” model at the forefront of industry efforts to resolve high volumes of REO properties.

At this Sunset Seminar, panelists provided an update on recent activity and key considerations in this important area, including the various ways purchases are financed, the challenges buyers and sellers face, and the potential use of securitization as an exit strategy. Questions the panelists addressed included:

• To what extent do these properties need rehabilitation prior to rental conversion?
• What acquisition channels exist for REO properties?  How are these purchases being financed?
• Can these properties be aggregated on a sufficient scale to make securitization a viable exit strategy?
• Are traditional property managers stepping in to manage these rental pools, or are new players filling the role?
• In what ways are rental pools different from traditional residential mortgage pools? Can a comparison be made to commercial mortgage pools?
• Have rating agencies developed robust criteria for securities backed by rentals? Will investors purchase these securities without ratings?

Registration was complimentary for ASF members and nonmembers.