The government-controlled mortgage-finance giant said it had stopped selling properties to Vision Property Management after conducting a review of the firm’s rent-to-own program.
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 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, including Washington.
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.
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A series of articles by 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.
Rep. Elijah Cummings, D-Md., 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.”
A Freddie Mac representative did not immediately respond to a request for comment.
Fannie’s policy turnabout follows the sale of thousands of rundown homes to Vision and its competitors at bargain-basement prices in the aftermath of the foreclosure crisis.
Vision has come under scrutiny recently for what regulators and senators have called its predatory lending practices in real estate. The South Carolina firm bought thousands of foreclosed homes from the government, turning around and reselling these often rundown homes “as is” to aspiring homeowners.
In a pattern first reported in The Times, Vision and other firms often spend no money on renovating the homes, putting the onus on the tenants to bring the property up to code or lose their contract. In several cases where lead paint was present in a property, Vision failed to disclose the hazard, including a house in Baltimore that prompted Cummings and his office to investigate further.
The congressman earlier this month criticized Vision for failing to cooperate with his investigation and not providing all the documents he had requested. In a statement issued Tuesday, Cummings said, “Vision withheld documents from both Congress and Fannie Mae, so I applaud this decision to end sales to this company.”
A lawyer for Vision took issue with Cummings’ characterization and denied his client was being singled out by Fannie. The lawyer noted that Fannie was reviewing dealings with all rent-to-own and contract-for-deed firms.
“We’ve provided them with every single relevant document that they have asked for,” said Doug Gansler, a lawyer with Buckley Sandler who represents Vision. “We have fully cooperated because the mission is to provide homeownership.”
Other lawmakers have also raised concerns about Vision and similar firms. During a Senate hearing in May on the future of Fannie and Freddie Mac, the director of the Federal Housing Finance Agency, Mel Watt, was questioned over the sale of foreclosed homes to firms that use seller finance contracts to sell to homeowners.
Fannie also intends to begin reviewing how investors who buy more than 25 foreclosed homes in a year are using them and will ask those investors to provide data about the homes.
After the housing market collapsed nearly a decade ago, Fannie resold about 400,000 homes to investors, including more than 10,000 to firms that specialize in seller-financed deals. Some of those homes were sold in bulk transactions at rock-bottom prices. Fannie stopped such bulk sales in 2014. But firms continue to buy individual homes from Fannie on the open market.
In all, Fannie has resold 1.2 million homes since 2009, the worst year of the crisis.