Bank Homes - The Biggest Hurdle to Solving Housing Crisis
The new administration under President Obama has rightly understood that it is the Bank Homes that are posing to be the biggest hurdle in solving the housing crisis. Unless the housing problem has been resolved the economy would continue to flounder.
Bank homes are also known as Real Estate Owned or REO’s, Bank Repos or Bank Repossessed Homes. It has always been a part of the mortgage world from historical times but what is unique this time is the staggering number of bank homes lying vacant, untended and unsold.
The federal government is releasing funds and channeling it through HUD for the purchase of bank homes. These will be repaired and then resold or let out to deserving candidates who would have to meet certain conditions. They would have to come from a certain income level and be occupants of the units. Loans would be made available covered by insurance net of FHA. As yet the impact has not been noticed but understandably it will take time.
Since April foreclosure numbers have drastically shot up causing all round concern. This is because of the expiry of the moratorium on foreclosures imposed by big lending houses like Fannie Mae and Freddie Mac apart from others during the festive winter season. After that the lenders followed a wait and watch policy to see what steps the new government would take. Now that this has been known they are foreclosing on all those borrowers who are not qualified for federal help. This increase in foreclosures will lead to a corresponding spike in bank homes.
Apart from the federal government the state and local authorities are taking action against the practice of neglected bank homes. The banks are avoiding taking on responsibility and evading getting their names registered as the new owners. The lenders are also citing legal clauses saying that while the house is in foreclosure the banks are not responsible for its maintenance since they do not possess the title deeds. In retaliation the authorities are imposing fines and attaching these as liens to the houses.
Many banks have collapsed and those that are running are extremely shy about advancing housing mortgage loans. As such sale of bank homes is not picking up.
