BofA developing foreclosure rental programs to deal with distressed properties
by JON PRIOR
Housing Wire
Friday, December 9th, 2011, 3:35 pm
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."
In February, BofA formed the division to handle the servicing for delinquent mortgages, loans no longer being written, and to sort out outstanding representation and warranty claims. Currently, more than 35,000 employees at the bank are sorting through 1.1 million loans 60 days delinquent or worse, according to its third-quarter financial statement.
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 Federal Deposit Insurance Corp., 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.
Jacob Gaffney contributed to this report.
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