Bank of America looking at new program to rent homes back after foreclosure
Bank of America is looking at a new program to rent a home back to the borrower after foreclosure.
“There are programs that we are quite interested in,” said Ron Sturzenegger, who leads the bank’s legacy asset servicing division, in an interview with HousingWire. “We are talking with investors that would come in and buy these houses and would lease them back to who would now be the now tenant.”
The Federal Housing Finance Agency is working on an REO rental program for Fannie Mae and Freddie Mac. It received more than 4,000 ideas on how to do it.
But private banks own $50.4 billion worth of REO properties, too, according to the FDIC, and millions of these homes are sitting vacant.
Sturzenegger described how their idea would work. “We are looking at programs where you can capture somebody before the REO process and offer a deed-for-lease. We would go to the customer and say, ‘We’ll do a short sale. Will you be interested in leasing your property back? We’re still going to sell the property. You will no longer be the owner. But you can be a tenant now in that same property and save you from moving on,’” he said.
Sturzenegger stressed the bank would still sell the REO as before in areas where there is a market for them and they can still get reasonable bids. But some areas are so saturated with inventory, there isn’t enough investor or homebuyer demand and properties can sit for years uninhabited.
Rick Sharga, the executive vice president at Carrington Mortgage Holdings, said in an interview that many firms, including Carrington are preparing to participate.
“We already have the infrastructure and assets in place to participate effectively,” he said. “Everyone is waiting on final direction from the FHFA.”
Sturzenegger stressed the private program at BofA is in its infancy. “It’s in the very early stages,” he said.
—— so what does this mean?
So the way we interpret this is… in areas like Northern Palm Beach County where REO homes sell quickly, most often with multiple offers, this program would never see the light of day…however, in areas like Port St Lucie where the inventory is so abundant, it’s in the bank’s interest to not end up with an REO, rather facilitate a short sale to an investor who will keep the owner on as a tenant paying rent. That is, assuming they can afford the rent. In an area where it still takes 2 years after stopping payments to actually lose your house, do we really think anyone is going to bite at this? It’s a nice idea in theory, and it certainly serves the bank, but paying rent still doesn’t beat living in a free house, so until we unclog the courts, we don’t see many people jumping at the chance. It’ll be interesting to see what unfolds…
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Peggy Berkoff & Andrea DiRico
North County Properties & Investments
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Peggy 561-301-2243 cell/text, PBerkoff@NCPflorida.com
Andrea 561-543-8715 cell/text, ADiRico@NCPflorida.com
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