The Federal Reserve (Fed) is making efforts to improve the housing market for the broader purpose of restoring economic stability in the United States. According to The Chicago Tribune, the Fed has released new policies with the purpose of implementing a course of action that would move to turn banks’ foreclosure inventory into rental properties, and then ultimately selling those homes to investors. Our Oak Park foreclosure attorneys understand that one of the goals of the Fed’s new policies of converting foreclosures to rentals is to allow banks to relinquish assets that carry minimal value.
The banks are not the only parties to potentially reap the benefits of this new process. People in need of housing could also gain significant advantages from the conversion of foreclosures to rentals. Specifically, people facing foreclosure would have a better chance of renting property despite their poor credit, and more importantly, they would not be left homeless. Each Oak Park foreclosure attorney at our firm recognizes that in the successful conversion of foreclosed homes to rentals, lenders could also receive Community Reinvestment Act credit for their service in providing housing to those in need, namely low-income and moderate-income people. Therefore, this conversion process can positively affect the needs of banks and people in need of housing.
In order for this system to be successful, the Fed has expressed the significance of the banks’ actions. Specifically, banking organizations should make good faith efforts to dispose of foreclosed properties at the earliest possible date. To counterbalance the required quick action of the banks, the Fed has stated that it will allow the banks to rent out foreclosed properties without being required to demonstrate continuous active marketing of the property for sale. However, the banks must follow the relevant policies and procedures in order to be granted this leniency.
This system of converting foreclosures into rentals has been the topic of discussion for some time. Bloomberg Businessweek reports that as early as last year in September, Fed Governor Elizabeth Duke pushed for government efforts in promoting the rental of foreclosed homes. Like most experts, Duke understood that the recovery of the housing market was a necessary component in the revitalization of the economy as a whole. In order for this system to come into fruition, the Fed is taking strides to remove some of the barriers in the conversion of foreclosures into rental properties.
Bank of America (BofA) is the first entity to test the Fed’s new policies. Last month, BofA implemented a foreclosure-to-rental pilot program for 1,000 homeowners who are facing foreclosure in Nevada, Arizona and upstate New York. In this program, BofA has promised these homeowners that they would be relieved of their mortgages. In exchange for the mortgage forgiveness, the homeowners facing foreclosure will enter into rental contracts with BofA. The rental properties will then be sold to investors.
If the Fed is successful in its efforts to put this conversion system into full effect, troubled homeowners facing foreclosure would have more legal options. Until this system is officially adopted and injected into the slow-moving economy, those who are facing foreclosure must be knowledgeable of the other many legal options currently available. If you are facing foreclosure, please contact an Oak Park or River Forest foreclosure attorney at Emerson Law Firm to discuss your options.
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