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The Cost Of Owning 150,000 Foreclosed Homes

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The Cost Of Owning 150,000 Foreclosed Homes

The Cost Of Owning 150,000 Foreclosed Homes

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RENEE MONTAGNE, host:

Now we're going to hear about some huge costs associated with an even longer running crisis: home foreclosures. In May alone, nearly 7,000 homes were repossessed around the country, according to the firm RealtyTrac. Fannie Mae, the government-sponsored mortgage lender, has been left holding a lot of those repossessed homes.

NPR's Tamara Keith tells us how Fannie Mae is trying to keep all of the homes it now owns looking presentable.

TAMARA KEITH: When you own 153,000 homes, even little things get expensive fast.

(Soundbite of lawn mower)

KEITH: Like mowing the lawn. At this foreclosed townhouse in Lanham, Maryland, two men swoop in, quickly mowing and edging the small front yard. Fannie Mae owns this home. And it's paying for the lawn crew to come every two weeks or so to keep up the curb appeal. But it's not just this lawn.

(Soundbite of lawn mower)

KEITH: Fannie Mae officials won't say how many lawns it's paying to maintain, but it's a lot. Say only half of the homes have lawns - a conservative estimate. That's still more than 75,000 lawns.

(Soundbite of lawn mower)

KEITH: Multiply that by a six-month grass-clipping season, mowing twice a month at, say, 40 bucks a mow. And, rough estimate, here, Fannie Mae is spending something like $36 million a year just to mow the lawns of the homes it now owns.

(Soundbite of lawn mower)

Ms. KAREN PETROU (Federal Financial Analytics): Mow, water, prune, clean the gutters, you know, sweep the walk, and on and on and on.

KEITH: Karen Petrou watches Fannie Mae's books closely at her firm Federal Financial Analytics.

Ms. PETROU: This is just one of the costs that Fannie and the rest of us will pay to dig out of a very big hole.

KEITH: When she says the rest of us, she means it. Fannie Mae's tab from U.S. taxpayers is up to $86 billion since September of 2008, when the mortgage giant was taken into government conservatorship.

In just the first quarter of this year, Fannie racked up $488 million in foreclosure-related expenses. To get a sense of how that adds up, let's go back to that townhouse back in Lanham, Maryland.

Ms. ELONDA CROCKET (Executive, Fannie Mae): We will be investing approximately $15,000 in this asset in order to repair it.

KEITH: Elonda Crocket is an executive at Fannie Mae who deals with managing its massive portfolio of foreclosed properties. She shows me around the house. It's in full-blown repair mode.

Ms. CROCKET: And you can see we're replacing the shower surround and the doors. We'll also paint in here and replace the vinyl.

KEITH: Using a subcontractor, Fannie will get this house ready to sell. Chipped, bold paint colors are covered with a neutral tone. A stolen air conditioning unit and missing copper pipes are replaced. New light fixtures and wall-to-wall carpeting are installed. Crocket says the idea here is to stabilize neighborhoods and to get properties to a place where first-time homebuyers can imagine themselves moving in.

Ms. CROCKET: We want to make sure that we're comparable with the market or with the neighborhood. And we want to make sure that we can maximize our return on the investment.

KEITH: In 2010, Fannie Mae did similar repairs on 87,000 foreclosed homes. Guy Cecala, publisher of Inside Mortgage Finance, says these days, Fannie is the nation's largest owner of homes. And as a result, it's...

Mr. GUY CECALA (Publisher, Inside Mortgage Finance): I think undisputedly, the largest purchaser of paint and general appliances for these homes they're fixing up.

KEITH: Cecala says Fannie Mae has long set the gold standard for dealing with foreclosed homes.

Mr. CECALA: Real estate agents list properties, and they brag about them being Fannie Mae foreclosures or repairs.

KEITH: Paid for with taxpayer dollars. But if you think mowing tens of thousands of lawns and buying hundreds of acres of new carpet is expensive, Karen Petrou of Federal Financial Analytics says just imagine the alternative.

Ms. PETROU: If they don't maintain the houses, then the neighborhoods go downhill. Other people are put at risk, and the housing crisis gets worse because you have still more downward pressure on overall house prices.

KEITH: Fannie Mae expects to be in the home-owning, lawn-mowing, house-repairing business for some time to come. It says it will take years to get the number of foreclosed homes on its books back to pre-crisis levels.

Tamara Keith, NPR News, Washington.

(Soundbite of music)

MONTAGNE: You're listening to MORNING EDITION, from NPR News.

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