Bloomberg News

Signs outside of a foreclosed home in Greensboro, N.C., in February.

The National Association of Realtors took a public shot at the Obama administration on Wednesday, criticizing an effort to alleviate some the housing market’s woes by renting out foreclosed properties.

For several months, Obama officials have been studying ways to rent out foreclosures owned by the Federal Housing Administration and government-controlled mortgage giants Fannie Mae and Freddie Mac.

Earlier this month, a U.S. housing regulator invited investors to submit initial applications to qualify to bid on pools of foreclosed properties owned by Fannie Mae that are already rented out under an existing program. It involves six areas: Southern California, Las Vegas, Chicago, Phoenix, Atlanta, and parts of Florida.

However, the Realtors’ top economist, Lawrence Yun, criticized the idea. In a press release, Mr. Yun said that there are plenty of buyers snapping up foreclosures in “nearly all” housing markets around the country. As a result, he said, “a government proposal to turn bank-owned properties into rentals on a large scale does not appear to be needed at this time.”

Mr. Yun dialed back his criticism later in an e-mail. He noted that such a program might make sense in some states like New Jersey and Illinois with a court-run foreclosure process and a large backlog of foreclosures waiting to come on the market.

California, Arizona and Nevada, he wrote, have “no problem with absorption” of foreclosures, and have seen falling numbers of foreclosures on the market.

More details of the foreclosure-rental plan are expected in the coming months, but officials are looking at parts of the country where there is a large overhang of foreclosures and robust demand from renters. The idea is to help home prices stabilize in those markets by eliminating some excess supply. Sales of foreclosures would only be made after properties were on the market for a fixed period of, say, 60 days, providing an opportunity for buyers to purchase those properties – and for real estate agents to earn commissions — before any properties are sold in bulk and turned into rentals.

Many other experts say a foreclosure-rental program will be useful for the broader housing market and economy.

“It is still very much a buyers’ market as house prices continue to decline and inventories remain well above that consistent with a well-functioning housing market,” wrote Mark Zandi, chief economist at Moody’s Analytics, in an e-mail. “There is no better way to help the housing market in the next 12-24 months than a concerted effort to move more (foreclosures) into rentals before these distressed properties hit the for sale market and further depress house prices.”

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Lakeforest Mall in Gaithersberg, Md., might soon be added to that list.

Simon Property Group Inc., owner of 337 malls globally, has put the struggling Lakeforest Mall on the block after going delinquent in January on the property’s $137.8 million securitized mortgage.

Simon and its partner, General Motors Asset Management, own the mall’s 402,625 square feet of small-shop space but not its four anchor stores. The mall’s mortgage came due last July, but the Simon partnership opted against using the one-year extension option it had available to it, according to real-estate research company Morningstar Inc.

A Simon representative declined to comment on why Lakeforest Mall is listed for sale. Eastdil Secured has the listing. However, Morningstar notes that the mall was appraised for $120 million last July, which is less than its mortgage amount.

Simon and the special servicer handling the mortgage, C-III Capital Asset Management, are negotiating a pact for C-III to abstain from foreclosing while Simon tries to sell the mall, according to Morningstar.

Lakeforest Mall, built in 1978, posted occupancy of 84.5% in 2010, the latest year for which data is available. Green Street estimates the mall’s annual sales per square foot at $340, just short of the industry average. The Simon partnership bought the mall in 2007.

EdR

A rendering Education Realty Trust’s planned dorm at the University of Kentucky.

The University of Kentucky took a major first step Tuesday in its closely watched effort to transfer campus dorms to a private company.

The university’s Board of Trustees agreed to move forward with allowing Education Realty Trust Inc. to build and operate a new campus dormitory. The deal is expected to be finalized in coming weeks.

As we’ve reported, several colleges have entered into public-private partnerships in recent years to replace a portion of their student housing, but the University of Kentucky would be among the first major institutions to turn over all of its housing to a private real estate company. For that reason, and because it could be worth some $500 million, both Wall Street and academia are keeping tabs.

Education Realty eventually plans to upgrade and replace outdated student living spaces that have an average age of 44 years. (For the record, cinderblock towers and bunk beds bolted to the walls are out of fashion.) The deferred maintenance expense tops $200 million, money the school would rather put toward new classrooms and research space.

Construction of the first 600-bed dormitory could start in April with completion possible next year. According to a draft of the 78-page ground-lease, the rent can’t top $3,490 per bed per semester for the 2013-‘14 academic year — in line with current rents. (Student housing isn’t cheap!) To be sure, modest increases are expected. The university will receive a “residence life fee” of $639 per bed.

According to the Lexington Herald-Leader, at least one trustee likes the potential deal. “It is a daunting challenge to sign a lease that protects us over a 75-year term, but I think they have done it,” Pam May is quoted as saying.

For a look at the deal’s specifics, click here.

Follow Dawn @dwotapka

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