In an ironic twist, the same foreclosure crisis that helped to raise rents in America could now be used to offer some much-needed relief -- and Wall Street wants a piece of the action.
Wall Street firms including Paulson & Co., a hedge fund that made $15 billion betting against the housing market, have expressed interest in foreclosed homes being sold in bulk by Fannie Mae, The Wall Street Journal reports. The firms would likely rent out the homes immediately after purchase, simultaneously taking pressure off both the housing and rental markets (many former homeowners, forced to rent, have pushed up the cost of renting across the nation).
So far, Fannie Mae is only putting 2,500 foreclosed homes up for sale, or just 2 percent of all the foreclosed homes held by the mortgage giant, according to the WSJ. But should the the deal prove successful, the trial-run could be the start of a larger trend.
Low-income renters could certainly use some relief. That's because the average renter needs to earn at least $18.25 per hour to be able to rent a two-bedroom apartment and have cash left over for other expenses. The problem? The average renter makes only $14.15 per hour, according to a report released last week by the National Low Income Housing Coalition.
Since rents are rising as inflation-adjusted wages adjusted fall, don't expect that to change anytime soon.
The Federal Reserve has pressured policymakers to pursue a program that would convert the nation's massive pile of foreclosed homes into rentals. Federal Reserve Chairman Ben Bernanke wrote in a 26-page white paper in January that now would be a good time to turn foreclosed properties into rentals because the demand for rentals is rising, the demand for owner-occupied homes is low and banks remain reluctant to extend more loans to aspiring homeowners.
"With home prices falling and rents rising, it could make sense in some markets to turn some of the foreclosed homes into rental properties," Bernanke said in February, according to CNN Money.
The Federal Housing Finance Agency, the government regulator that oversees Fannie Mae, first announced the sale in late February.