A recent report from the Government Accountability Office found that the Federal Housing Administration lagged behind government-sponsored enterprises Fannie Mae and Freddie Mac in selling its foreclosed properties—known as real estate-owned properties.
From January 2007 to June 2012, the FHA disposed of more than 400,000 properties. Its combined returns, after accounting for property characteristic differences, were approximately two to five percent lower than those of Fannie and Freddie.
The report also found that Fannie and Freddie took an average of about 200 days after foreclosure to dispose of their REO properties, while FHA took approximately 60 percent longer at 340 days.
In the first half of last year, the FHA’s disposition returns and timelines improved relative to the GSEs. While all three use similar strategies to dispose of their REO properties, the FHA does not use some of the practices used by the GSEs that could improve its performance.
Additionally, the report found that, if the FHA’s execution rate and disposition time were on par with those of the GSEs in 2011, it could have increased its sales revenue by as much as $400 million and decreased its holding costs by up to $600 million for the year.
The GAO recommended that the FHA consider repairs to its system that could increase net sales, require the use of extra data for setting initial and subsequent listing prices and improve its oversight of contractors, which could boost consistency in contractor activities.