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Market Updates

David vs. Goliath: Calling on Congress to Rethink Wall Street Bulk REO Buys

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david vs goliathWe want to update you on an important industry concern and what’s being done about it.

You may recall one of your Mogul benefits is our lobbyist John Grant – this guy‘s actively making moves in Washington for the entire REI industry – for all of us, on our behalf. He’s our advocate, our reconnaissance team AND our foot soldier on the Hill.

We have of course been in discussions with John the disturbing, growing trend of institutional bulk sales from major Wall Street players actively trying to scoop up billions in residential properties. We see this as one of the toughest pills for many mom and pop investors to swallow right now in the current market.

Look, we all believe in the free market, and we’ll fight to defend it. But we don’t feel this trend is healthy at all – not for the “regular” investor on the street (the backbone of true recovery) and not for the market as a whole. When one of these funds blows up after buying thousands of houses (and they will), the fallout will be widely felt.

In discussing this “David vs. Goliath” trend with John, he recently sent us this update…


Pursuant to my last e-mail, here is a release regarding the institutional bulk sales.

We all believe in the free market, but also have seen suggestions from major Wall Street players that they want to buy billions in residential properties. If one of these funds blows up, I don't want the fallout impacting all of us. Therefore I think asking for a study on potential systemic risk to the housing market of one firm owning a billion in residential properties makes sense. Plus we don't want to have a situation where three or four outfits are buying everything in sight. This study should help us on multiple levels. This will NOT impact small and midsize bulk buyers, we're talking about the big ones here.

I think we maintain our commitment to the private market, and simply call for a study on the issue. We are going to be more active in getting our press releases moving forward as we expand our influence in Washington even further this year.

Thank you

Great news! We’ll continue keeping you in the loop on this as things progress. Here are the contents of John’s official press release on our behalf:

12-10 DPC headerDPC Encourages Congressional Review of Wall Street Bulk REO Purchases

October 11, 2012
Washington, D.C.

The following is a statement from DPC lobbyist John Grant regarding Wall Street institutional purchases of REO properties:

“As a leading proponent of the utilization of private market solutions to achieve a full housing recovery, DPC believes that there is clearly a role for Wall Street institutions to play in a robust recovery. Based upon recent media reports, institutional investments in residential real estate will increase dramatically in 2013 and beyond. DPC wishes to assess the impact of these purchases on smaller bulk buyers and smaller investors, as well as consumers and the overall health of the housing market.

In terms of the impact on small investors and bulk buyers, there is and will continue to be some impact in terms of inventory availability in certain cities. However, the notion that purchasing $1 billion in residential properties and coordinating professional management of these properties as they are rented is a simple task is incorrect. Wall Street institutions will continue to purchases in relatively small tranches, and additional purchases will be contingent on the execution of these smaller purchases. While some institutions may execute these models properly, others clearly will not. Therefore, we believe the impact of massive purchases from Wall Street on small investors may be exaggerated, as the proposed multi-billion dollar purchases are far from completion and contingent on many market factors.

DPC believes Congress can play an important role in terms of how massive bulk purchases impact consumers, and whether they pose a systemic risk to the housing market. Among the questions that should be addressed include:

Can a Wall Street institution properly manage thousands of renters scattered throughout a state, or even the country?

If the pool of prospective renters tightens, what impact will that have on the investment models of these firms?

What is the exit strategy for these firms? If there is a drop in home prices or other market-moving event, and these firms all seek to liquidate their holdings at the same time, would this pose a systemic risk to the housing market?

During its January meetings on Capitol Hill to introduce its 2013 Residential Real Estate Policy White Paper, DPC will request that members of Congress seek a report from GAO on these issues and others related to these purchases. DPC believes GAO can and will provide an objective study and fair guidance to Congress as to whether hearings should be held on the potential impact these massive purchases may have on consumers and the housing market.


About DPC: The Distressed Property Coalition is a private advocacy effort dedicated to making it easier to buy and sell homes. DPC is comprised of professional residential home rehabbers and investors. For more information on DPC please visit our website at www.distressedpropertycoalition.com

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