New Federal initiatives help shattered communities get on their feet

Posted on September 6th, 2010

Rent out bank inventory property
Make money available to rebuild shattered economies
Level the playing field with property speculators
Help borrowers stay in their homes

The staggering inventory of bank repossessions (also known as reo’s for real estate owned property) has attracted more attention recently as policy-makers ponder what to do with this. Washington Federal Reserve Bank Governor Elizabeth Duke has called for aid to communities wrecked by foreclosures. We have to stabilize them, she said, and that includes renting out properties owned by banks.

"Including rental options among the mix of stabilization strategies makes particular sense at a time of high unemployment," Elizabeth Duke concluded in an address she made at a Federal Reserve Bank conference held on Wednesday. These redevelopment strategies should incorporate lease-purchases and allowing foreclosed families to remain on as tenants.

"What began as a problem rooted in poorly underwritten loans has been exacerbated by high unemployment and slow economic growth," she added. "As delinquencies and foreclosures continue to grow, they will hinder the ability of communities to heal and ultimately to thrive."

In a related development last week, the Administration announced that banks had agreed to allow municipalities and non-profit groups the opportunity to purchase repossessed property before they offer this to the wider public. The idea behind this is that these groups could either renovate, or demolish and redevelop. Money for this is already on tap from Congress to the tune of $7 billion, however to date municipalities and non-profit groups were often out-bid by well-heeled speculators. The nation’s biggest mortgage banks (including Bank of America Corporation and Wells Fargo) have now agreed to allow these organizations 48 hours to evaluate real estate opportunities before they release these to the open market. The National Community Stabilization Trust will document the foreclosed properties available, and guide the local groups in determining which real estate to purchase.

"This agreement helps us level the playing field to give communities a better chance to stabilize these neighborhoods," Housing and Urban Development Secretary Shaun Donovan enthused. He added that he hoped that about 100,000 properties would sell this way.

In a different context, Donovan has also detailed Washington’s plans to kick-start an emergency loan plan for unemployed troubled borrowers. This initiative will also include a more aggressive re-financing strategy following the sharp fallback in sales during July.

"The July numbers were worse than we expected, worse than the general market expected, and we are concerned," the HUD Secretary said on CNN last Sunday. The Federal Housing Administration will begin a refinancing effort to help borrowers who are struggling to pay their mortgages, and will start an emergency homeowners' loan program for unemployed borrowers so they can stay in their homes. We're going to continue to make sure folks have access to home ownership.”

More news at www.foreclosureconnections.com.

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