Section 8 Housing - Coming Soon to A Leafy and Bucolic Suburb Near You

to pay me a fixed percentage of your income each month for your housing

Support for a government-led program to rent out foreclosed Fannie Mae, Freddie Mac and Federal Housing Administration homes is the most popular disposition strategy among panelists at the American Securitization Forum.

It’s the most popular, they say, because it works best for mortgage finance and macroeconomic fundamentals. This is a positive development for the long-strained relationship between federal regulators and the mortgage finance industry.

"Unless you have a 30% down payment or a 20% down payment or qualify for FHA, you can't get mortgage financing," said Vincent Fiorillo, portfolio manager at DoubleLine Capital, who said home ownership is "trending downward" due to restrictive credit conditions.

"We need a national program, you can't do individual trades on 3 million houses," he said.

The Federal Housing Finance Agency appears more willing to provide an REO rental program.

According to moderator Christopher DiAngelo, partner at Katten Muchin Rosenman, the foreclosure pipeline could add a million new REOs in this year and another million in 2013.

These properties should not enter into the for-sale market, warned Gary Acosta, co-CEO of New Vista Asset Management. "The feeling in the government is that if the floodgates open it would exacerbate the weakness in the market," Acosta said. "This is a way to reduce supply in the marketplace and stimulate demand."

But not everyone is convinced. Paul Willen, senior economist and policy adviser at the Federal Reserve Bank of Boston, provided some skepticism.

"I'm challenging the idea that the problem is coming. The problem is already here," he said. "If we limit principal reduction to prevent sales, we will get a lot more foreclosures. Negative equity keeps far more properties off the market than puts it on the market."

"I'm not inherently opposed to an REO rental program, but putting properties into rental pools doesn't take it off the market," Willen added. "Why buy if you can rent for cheap?"

This train has been coming down the track for a few decades now:

Gerald R. Ford - "A government big enough to give you everything you want is a government big enough to take from you everything you have," in an address to a joint session of Congress on August 12, 1974.^[1]