The Federal Housing Finance Agency so far has declined to green light a proposed Freddie Mac plan that would provide financing for investors looking to buy foreclosed homes and then turn them into rental properties, The Wall Street Journal reported Oct. 2.

While Freddie officials believe such a move would jumpstart the housing recovery, FHFA officials are worried that such a plan would block private banks from offering struggling homeowners new financing and ultimately hurt the market recovery all the while providing new business to a government-sponsored enterprise whose housing market role many lawmakers would like to wind down.

So far, banks have sided with FHFA. “If [Freddie] came along and offered funding, and it was on better terms, in all likelihood, the funding business would end up in their hands,” Steve Abrahams, a Deutsche Bank mortgage analyst, told the Journal.

Freddie’s proposed plan is geared toward experienced investors with property management background and not to the small-time player looking to buy several foreclosed homes, the Journal reported. So far investors have raised billions in funding for REO-to-rental investments, but debt often is a less expensive alternative. Some analysts say if Freddie were to offer financing to these investors, it could boost demand for foreclosed properties while also upping profits at the GSE.

“Financing from Freddie would be the greatest economic stimulus,” Aaron Edelheit, chief executive of American Home Real Estate Co., told the Journal. “You’d have the greatest land grab you’ve ever seen.”

Freddie officials began working on their plan earlier this year. While the FHFA continues its review of the proposal, Freddie may be facing an even bigger obstacle: an improved economy and an increasingly scarce supply of foreclosed properties for sale, the Journal reported.