Should the Government Sell REOs in bulk?

The Obama administration seems to be coming up with a plan to accelerate that trend by packaging foreclosed properties together and selling them off in bulk to investment groups who will rent them out. 

I don't completely understand the logic behind the plan, and in defense of the administration, it is an RFI (Request for Information) which suggests they are still figuring out the details themselves.  It is supposed to help make rents more affordable, and although it might help speed properties into the rental market a little faster, I don't think it will do anything to help rents in the long run.  I think it is mostly about trying to help the GSEs unload their REO property, and my cynical side fears that it is a plan pushed by big private equity investors to get them access to the nice returns that can be had picking up foreclosure properties around here as rentals.  Will this be good for taxpayers by cutting the losses for Fannie/Freddie/FHA on their foreclosures?  Maybe.  I can't see how bulk sales will bring higher prices for the homes for the GSEs, but it may cut their transaction and holding costs on the properties so they net more in the end.  That's a big if. 

My first impression is that this is a bad idea for hard hit areas like the Valley.  Lots of these homes are going to the rental market anyway, some by local investors and we also have out of towners with local agents buying investment property for them.  Others are selling to local families that are buying affordable foreclosure homes, and that is the silver lining in this whole mess.  Why would we want to reduce that opportunity for locals and pass it on to some hedge fund in New York just because there is a chance that Fannie/Freddie can cut their loss by a whisker.  In the long-run we end up with even more out of town landlords.

I might be a little more supportive of it if the investors who acquired property in this advantageous way were required to include a reasonable and fair, lease-to-own option for the tenants. 

And of course, we shouldn't give up on more effective loan modification plans.  For the few folks I know who have been successful with this, the modification effectively turn the homeowners into renters of their current homes but without the damage and displacement of the foreclosure process on families or neighborhoods.

These are just my initial thoughts and it will be interesting to see the feedback to the RFI and the eventual plan.  I doubt this will be the last post on this topic.