Lewis S. Ranieri, who helped pioneer conventional mortgage-backed securities in the early 1980s, is proposing a fix for the nation's housing mess.
The government-sponsored enterprises should ease their current restrictions and allow individual investors to purchase up to 50 foreclosed homes each, Ranieri said at a banking conference earlier in the week.
Fannie Mae currently limits individual investors to 10 real-estate owned properties each, while Freddie Mac restricts them to just four.
The two GSEs own a combined 300,000 homes, and the government has been struggling to unload that backlog since the housing market plummeted.
"The dead weight of the real estate market's huge REO inventory and the late stage delinquencies are dragging the nation's economy under water," Ranieri told a group of 250 bankers at the conference in Raleigh, N.C.
"Long-term structural harm faces us if we do nothing," he said.
He criticized James Lockhart, the former head of the Federal Housing Finance Agency, for imposing limits on individual investors who buy foreclosed properties at auction, typically on courthouse steps. Removing such barriers would let the market clear more quickly, said Ranieri, who now is the chairman of a specialty mortgage servicer.
He has previously urged the government to consider a
He said at the conference that though converting single family homes to rentals "sounds difficult," such programs are "shovel ready," and would have an immediate impact on both consumer spending and jobs.
Raising the GSEs' limits for individual investors would allow "the locals to go back to work," he said. "We're talking about creating jobs for builders, handymen, real estate professionals and reaching out to local doctors, lawyers and dentists who have the means to buy these loans."
Fannie and Freddie should also offer lower down-payment financing to individual investors willing to buy these homes, he said. "The missing element is a workable investor-finance program to set the process into high gear."
In August, FHFA issued a request for information on how to unload properties. It is sifting through the 4,000 responses.
