Foreclosed Homes Purchased by Colony Capital to be turned into Rental Properties By Joseph Shalaby Colony Capital, a private real-estate

investment firm, won an auction for 970 single family homes from mortgage giant Fannie Mae in a deal that cost the company $176 million. The properties are located in California, Arizona and Nevada, three states that have been hit particularly hard by the housing crisis that first began in 2008. The sale is part of new program being instituted by the Federal Housing Finance Agency (FHFA). It oversees the work being done Fannie and its associate company Freddie Mac. The purpose of the program is to take the large number of foreclosed homes off the market in a fiscally responsible way that wont cause further harm to the housing recovery. Efforts by the FHFA and Freddie Mac have shown some promising signs of success. The governments decision to buy large quantities to mortgage-backed securities every month has helped drive down mortgage rates. And its also allowed consumers who are underwater on their mortgage to refinance at rates that are more affordable. One way that Colony Capital intends to fulfill this goal of safely removing foreclosed homes from the market is to have investors who purchase the properties rent them to tenets instead of immediately putting them up for sale. In what could possibly be a sign of improvement in the housing market, competition for the foreclosed homes was fierce. Colony Capital ultimately bought the properties at 112% of their estimated worth. Other signs point to continued growth in the housing market as well. The home vacancy rate has fallen in the United States as an estimated 1.1 million new households were formed in the third quarter of this year. Several hedge fund managers and other investors hopping to see a lucrative return on purchases for foreclosed homes joined in on the bidding. The purchase is the largest single buys of foreclosed homes so far. The program by the FHFA to convert foreclosed homes into rental properties is not without its critics. Some real estate investors, including California Assn. of Realtors have opined that the housing market is actually suffering from a lack of houses. They believe that the market has sufficiently opened up to absorb a larger stream of foreclosed homes coming to market. The purchase by the colony is only the beginning part of where the foreclosure market seems to be heading. Numerous companies including Colony, Blackstone Group LP and Waypoint Real Estate Group LLC have publicly declared their intentions to purchase an estimated 8 million single-family homes and convert them into rental properties.