By Matthew Goldstein and Jennifer Ablan
NEW YORK (Reuters) - For the second time in five months, Bank of America is tapping the red-hot market for foreclosed homes by seeking bids on a bulk offering of several hundred single-family homes.
Over the past several weeks, the nation's second-largest bank by assets has solicited bids for a bulk deal that includes up to 500 largely vacant single-family homes, some of which BofA acquired after its merger with Countrywide Financial, according to several sources within the real estate and mortgage sectors. Countrywide was one of the largest subprime lenders in the United States.
The bulk deal, which includes foreclosed homes in California, Florida, Arizona, Texas, Pennsylvania and Georgia, is one of the biggest block offerings of foreclosed homes ever done by a bank, these sources say.
The bulk sale comes at a time that institutional investors, including private equity firms and hedge funds, are raising money to invest in a bulk offering of 2,500 renter-occupied foreclosed properties being auctioned by Fannie Mae. The government-sponsored mortgage finance firm is currently accepting bids for that bulk sale under a trial project by the Federal Housing Finance Agency, which regulates both Fannie Mae and Freddie Mac.
The FHFA program is attracting interest from firms like private firm TPG Capital, investment firm Oaktree Capital Management, hedge fund Och-Ziff Capital, bond shop TCW and New York City's Amherst Securities Group, as previously reported by Reuters.
A Bank of America spokesman declined to comment on the bulk deal.
Late last year, Bank of America went to market with a smaller bulk offering of about 200 foreclosed homes in California and Florida. One source familiar with that deal said the homes in that pool were acquired by several buyers.
One mortgage investor, who did not want to be identified, said it appears that Bank of America is moving to hold regular bulk sales of foreclosed homes as a way to reduce its inventory. The investor, who has not bid on either bulk deal, said it is a good time for the bank to sell foreclosed homes, given the level of interest shown by institutional investors right now.
Private equity firms and hedge funds are eyeing the foreclosed market because the homes can be acquired at a significant discount and then rented out for steady cash flow. While the market for purchasing single-family homes remains stagnant in the wake of the financial crisis, rental properties are a hot commodity and even deemed a new asset class.
One advantage of a bulk offering by a bank is that investors are not required to hold onto the homes for an extended period of time.
In contrast, the FHFA, which is overseeing the Fannie Mae offering, is requiring buyers to hold onto the properties for several years to avoid having them flipped for a quick profit.
To date, the FHFA has prequalified several hundred investment firms, property managers and other organizations to bid for the Fannie bulk pool, say sources familiar with the process. But it's still not clear how many bids the FHFA will actually receive.
The deadline for submitting bids has been extended from early April to mid-May. But sources say the deadline may not be a firm one.
(Editing by Jan Paschal)