EXCERPT: One of the biggest firms in the rent-to-own home business is now on the federal government’s do-not-sell list. Fannie Mae, the government-controlled mortgage finance giant, said on Tuesday that it had stopped selling properties to the firm, Vision Property Management, after conducting a review of the firm’s rent-to-own program, which operates in more than a dozen states.
The mortgage finance company will also impose restrictions on future sales of foreclosed homes to firms that engage in abusive forms of seller financing — which includes selling homes on either rent-to-own leases or in long-term installment agreements known as contract for deed. The policy change by Fannie could put a big crimp in the business model of certain investment firms that have sprouted up since the financial crisis. These firms buy foreclosed homes on the cheap and sell them to people unable to qualify for a conventional mortgage.
A series of articles in The New York Times last year detailed abuses with rent-to-own leases and contract for deed sales. The articles illustrated how people across the country were being duped by the promise of owning a home without realizing the hidden cost of repairs and sometimes overdue fines owed to municipalities.
Housing advocates have criticized the seller-financed business for fostering abusive practices that take advantage of poor people and contribute to neighborhood blight. Representative Elijah E. Cummings, a Maryland Democrat and the ranking member of the House Committee on Oversight and Government Reform, recently wrote to the Federal Housing Finance Agency, urging the regulator to stop Fannie Mae and Freddie Mac from selling foreclosed homes to such firms after becoming concerned about the practice in Baltimore.
“Following an extensive review, Fannie Mae will no longer sell REO properties to Vision Property Management,” said Pete Bakel, a spokesman for the mortgage giant, referring to real-estate-owned properties. “Fannie Mae remains committed to providing liquidity, stability and affordability to the U.S. housing and mortgage markets, and being a leader and innovator in neighborhood stabilization efforts,” he added. Continues…