Federal Reserve Issues Policy Statement on Rental of REOs
April 9, 2012
On Thursday, April 5, 2012, the Federal Reserve Board (Fed) issued a policy statement clarifying policies regarding the rental of REO properties acquired by banks through foreclosure. In the statement, the Fed explained that its general policy is for banks to act in good faith to dispose of properties at the earliest practicable date, but that the renting of REO properties within statutory and regulatory limits is consistent with this policy in light of the extraordinary market conditions.
Additionally, the Fed notes that existing federal and state laws and regulations limit the amount of time banks may hold REO properties (generally for up to five years), and that banks should pursue clear and credible approach for the ultimate sale of the properties within the applicable holding-period limitations. Banks that use third party venders to manage these properties, such as real estate agents or professional property managers, are expected to implement policies and procedures to ensure such individuals have appropriate expertise, are in sound financial condition, and have good track records in managing similar properties.
In a letter sent to six regulators, including the Federal Reserve, on March 28, 2012, President Moe Veissi recommended that regulators take a cautious approach when evaluating the benefits of rental programs versus other foreclosure prevention efforts that focus on keeping families in their homes as homeowners, including the Treasury Department’s HAMP and HARP programs. NAR will continue to monitor these programs to ensure that the prohibition on banks in real estate is not violated.