Federal Reserve Outlines Guidelines for Banks to Rent Out Foreclosures
In a press release dated today, the FED outlined the rules the banks must follow if they are to rent properties they acquire by foreclosure. Essentially, the FED is not only allowing, but encouraging banks to become landlords! Fed Chairman Ben Bernanke believes this can help stabilize the housing market. Now that the settlement and ligation ( the $25B settlement between banks and Fed Gov. – which put many foreclosures on hold last year) has passed it is expected that foreclosures or bank owned properties will again start to hit the market in waves. The idea here is that banks can use their discretion to rent properties instead of selling them. In markets where there is more supply than demand, this will be a good thing to help stabilize prices. This could also drive down rents, which have increased substantially in the past few years.
Here is my take, if there is one dominant concern about the recovery of the housing market it is that everyone knows there are plenty of foreclosures in the pipeline that will eventually need to be dealt with. This could flood the market with homes and further drive down prices. Just the perception of this alone is causing many would be home-buyers to hold off and continue to wait.
If this initiative works, it could provide a much needed balance to the housing market and help to sustain the recovery that is showing definite signs of improvement.
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