As we know there are pockets in every state doing well and others getting hit hard by foreclosures. The Feds fear that when the banks release these properties it may cause more drops in prices. Renting out foreclosures could reduce bank’s losses on the books and it may help in the over prices of homes for sale.
The Federal Reserve has given the thumbs up for Banks to go ahead and rent out their foreclosures. Bank of America is starting a pilot program to rent homes to families that have been foreclosed on. Instead of calling it a Lease to Own, they call it a Mortgage to Lease. With raising rental prices and falling home values this could be something that could help stabilize the market if done right.
If the Banks choose rent out these foreclosures, and have over 50 rentals they will have to follow strict policy and procedures that comply with federal rental laws. They will also have to follow Tenant-Landlord laws and keep up with maintenance codes. There is also need to measure the risk of costs vs. benefit and the risks of renting general.
We all know that not every renter may not care what they do to the house or have it in their best interest. While there are many excellent renters out there, there are also renters that allow the homes to deteriorate for lack of knowledge how to keep up a home or just because they may not care.
Moreover, a Bank’s motive is not to make large profits, but preserve value on these properties. They may find out that renting is time consuming, expensive and may be something they should have avoided in the first place. To boot, most Government programs do not go exactly as planned so it may not be as easy as one may think to transition banks into landlords. If it does this could be a great thing for housing prices as there will be fewer foreclosures for sale increasing demand for traditional sales and short sales and increasing home value!