A Huge Housing Bargain -- but Not for You

From the Street

If your the type that likes big government spreading our wealth around, if you get all warm and fuzzy thinking about the good ol days of Pork and Patronage I (Stimulus I) and the bailouts that transferred billions and billions of our dollars over to Goldman Sachs, Chase and the other Zombie banks so they could continue handing out huge bonuses and continue living a lifestyle they think they deserve, and are getting a little itchy waiting for the news about QE3, and Pork and Patronage II, here is a little something to hold you over.

The largest transfer of wealth from the public to private sector is about to begin. The federal government will be bulk-selling the massive portfolio of foreclosed homes now owned by HUD, Fannie Mae and Freddie Mac to private investors -- vulture funds.

These homes, which are now the property of the U.S. government, the U.S. taxpayer, U.S. citizens collectively, are going to be sold to private investor conglomerates at pennies on the dollar. These investors will instantaneously become the largest improved real estate owners and landlords in the world and then be allowed to rent them back at market rates.

The Federal Housing Finance Agency (FHFA), the Department of Housing and Urban Development (HUD) and the U.S. Treasury Department issued a Request for Information (RFI) concerning the disposition of the inventory of foreclosed homes owned by the federal government.

An RFI is a way for the federal government to get input from the private sector on how to accomplish the goals laid out in the request. But that's really just a facade, as the RFI was structured by the investors to begin with.

The way to keep taxpayers from pushing back is to structure the RFI so that the real intention, the bulk sales, is masked by feel-good goals, such as stabilizing neighborhoods and increasing the supply of rental properties. The mainstream media has been tagged to play baking dog on this, and are doing their assigned jobs magnificently, every major newspaper in the country has done an article on this
story allowing readers to assume that Fannie, Freddie and HUD will be renting the properties directly to families who need housing. And although there is an allowance for these kinds of rentals, it is a minor political facade to the obvious true goal of bulk-sale privatization of these homes.

The entire massive HUD REO (Real Estate Owned) Portfolio is quietly managed by a handful of private firms already, a group listed as Management and Marketing Contractors.

These M&M companies are principally owned by and employ former high-ranking government officials from the various germane agencies -- the Treasury, HUD, FHA and others. And they will provide the necessary access to the current government employees who are tasked with bringing this program to fruition. Once the privatization is complete, those government employees will move from their positions, and many will take up new employment at one of the M&Ms or the new vulture funds.

You and I will not be allowed to participate. These investors will come from the private-equity and hedge-fund community, Goldman Sachs(GS_) and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction.

So if schmucks like us were hoping to get some housing bargains, that's too bad, we'll have to pay market prices and hope for the best.

Nice to know that Big Government continues to work at sticking it to us.