This from the Los Angeles Times -
The Federal Reserve has released a policy statement that could encourage the practice of converting lender-owned repossessed homes into rental properties.
By converting foreclosures to rentals and creating a steady cash flow, not to mention homes that are no longer sitting vacant, banks could reduce the number of their "substandard assets," a classification used by banking regulators to determine the health of banks.
The central bank also said in its statement Thursday that lenders could receive Community Reinvestment Act credit for providing housing to low- and moderate-income people by successfully converting foreclosed homes into rentals.
Taken together, the policies could help encourage a nascent move to turn banks' foreclosure inventory into rental properties and then sell those homes to investors.
Earlier this year the Fed released a housing market white paper arguing that removing some of the barriers for converting foreclosures could help stabilize the housing market. Rental properties have become pricier and harder to find as the housing/mortgage market suffered.
Bank of America Corp. last month rolled out a foreclosure-to-rental pilot program for 1,000 homeowners who are headed into foreclosure in Nevada, Arizona and New York. Bank of America officials have said it will forgive the mortgages of troubled borrowers participating in this pilot program through transactions called "deed-in-lieu of foreclosure" and then strike rental contracts with those borrowers. Bank of America will then sell those rental properties to investors.
Wall Street hedge funds and private equity firms are positioning themselves to snap up these rental units.
What do you think? Good idea? Should this have been done sooner? Share your thoughts.
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