The first bulk sale of 2,500 Fannie Mae REO properties will sell at a discount to single assets, but has the potential to drive prices up after the first $10 billion to $20 billion in foreclosed homes are sold to institutional investors and converted to rentals, according to the Amherst Securities Group (ASG).

The next $400 billion in REO sales could drive prices “much higher,” ASG chief executive Sean Dobson told a congressional panel Monday.

While home values appear to be stabilizing now, there are 6 million to 9 million unresolved and impaired mortgages to be concerned about, Dobson said at the House Financial Services subcommittee hearing in Chicago.

The bulk sales of Fannie and Freddie Mac properties sponsored by the Federal Housing Finance Agency could create a “back stop for home prices,” he said, and encourage more potential homebuyers to move off the side lines.

ASG’s parent, Amherst Holdings, has created an investment fund to buy REO rental properties.

Federal Housing Finance Agency senior associate director Meg Burns told the House subcommittee members that the agency is presently evaluating applications by investors who want to bid on the Fannie REO package. Eligible bidders will be notified in a few weeks.

“This rigorous application process is intended to narrow the pool of eligible bidders to those who have the financial and operational expertise, but also the mission-oriented commitment to ensure that this program brings capital to markets in need in a way that stabilizes communities,” Burns testified. “FHFA’s goal is to complete this first pilot transaction in the next few months,” she added.

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