The Federal Reserve has issued new policy statement for banks that want to rent out foreclosed properties that they own. Normally the banks would be required to sell the properties, but the Fed is making an exception given the stressed market conditions. The policy said that banks need to establish procedures for how they are going to rent the properties, determine whether the properties adhere to local building codes, whether the homes are inhabitable, and how they are going to choose which properties to rent.
Home prices and rents are inversely related, which means as housing prices fall (due to decreased demand), rents rise (due to increased demand). We have seen an increase in rental rates as homeownership has declined. So adding more homes to the rental pool could theoretically help stem the rise in rents. What remains to be seen is whether banks would make good landlords.
As a Realtor, I can tell you that when dealing with foreclosures it can be very difficult to get the bank to respond to questions and offers. We have also all seen homes that are bank-owned in utter states of disrepair that violate local codes. Would banks be more responsive as landlords? Would tenants be able to reach someone with the power to act if there were a problem with the home? Over the past few years the banks' performance has been subpar (the robo-signing scandal comes to mind); I am not sure if there is a reason to believe they would be good landlords.
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