A condemned sign hangs outside of an abandoned home on Beaconsfield Street in Detroit. (Jeff Kowalsky/BLOOMBERG)

The Obama administration is slowly trying to even out that imbalance by turning foreclosed properties held by Fannie Mae into rental properties run by private investors, as there’s a much stronger market for home rentals than sales. For now, it’s a pilot program that aims to convert some 2,500 foreclosed homes into rentals through bulk sales. But its success could prompt the White House to scale up its efforts more dramatically, and it’s one of the few ways that the Obama administration can try to turn around the housing market without Congress.

On Monday, the Federal Housing Finance Authority released new details about the Fannie Mae properties that will be offered to potential investors. To some observers’ surprise, about 85 percent of the properties are already occupied by renters, contrary to their expectations that the program would mostly target vacant, foreclosed homes. As a result, “the pilot plan will therefore do almost nothing to reduce the number of vacant homes for sale or provide more homes to rent,” writes Paul Dales, senior U.S. economist for U.K.-based research firm Capital Economics, in a new research note. Calculated Risk’s Bill McBride echoed similar concerns.

But other analysts believe that the pilot program, though limited in scope, might be a sensible way for the White House to dip its toe in the water, particularly in light of its past shortcomings of the housing front. By focusing on properties that already have tenants, investors might feel more confident about taking the plunge. “You’re assured of some cash flow up front, you don’t have to invest so much time and effort to look for renters,” says Cristian deRitis, an economist for Moody’s. And while the effort might not do much to reduce the number of already vacant homes, it can prevent at least some properties that are currently occupied from being added to the heap of vacant foreclosures.

That’s what the FHFA is stressing as well. “The pilot transaction very much gets at the issue at hand-helping to stabilize communities by keeping people in their homes where possible,” said Meg Burns, Senior Associate Director of Housing and Regulatory Policy at FHFA. “This helps stabilize neighborhoods because many of the properties will continue as rentals instead of moving quickly to the for-sale market. In addition, it is easiest to price properties with renters already in place, which should help to attract investor interest.”

What’s still unclear, however, is what kind of investors the Obama administration will be able to attract, what the bids will be, and whether the rentals have all their ties cut to the government-sponsored housing giants. The Federal Housing Finance Authority said that the government-backed Fannie could “possibly” still retain a stake in properties that are sold, according to Corinne Russell, an FHFA spokesperson. The office emphasizes, however, that only financially responsible, carefully scrutinized investors with property-management experience and “a strong community presence” will be allowed to bid on the properties. Among those who are qualified, investors will be chosen “based on what provides the best value for the taxpayers,” Russell said.

Chris Mayer, professor of real estate finance at Columbia University, expects that the initial sales under the program will be in cash, but the still-tight credit market could potentially restrict interested buyers as well. Some have even suggested that the government should take a much bigger role in the program by offering government financing — a change that could certainly help the program scale up and that the Federal Reserve advocates — but that would be far more controversial as it would risk more taxpayer dollars.

But given sheer scale of the crisis — Mayer estimates that about 4 million homes are seriously underwater or foreclosed upon — even those who support the program say they don’t expect a dramatic turnaround any time soon. “Expectations for the program overall should be tempered — this shouldn’t be a panacea.” deRitis said, describing the pilot program as “prevention” for preventing foreclosures from turning into vacancies.

Ultimately, deRitis hopes the program will expand to other government-sponsored enterprises like Freddie Mac. But the Obama administration was burned the last time it rolled out a large-scale modification program — running into complications that made its first mass refinancing effort a disappointment, recently forcing it to recalibrate the program. As such, deRitis doesn’t expect the foreclosure-to-rental program to be scaled up massively any time soon. “This is a all new territory for GSE and FHAs,” he concludes. “I understand their caution.”