The Fed Strikes Back

April 18, 2012

A new strategy is being used that could help Chicago real estate as well as the market for the rest of the country.

In one corner of the real estate market ring sits the brutal knockout artists known as foreclosures. Leaving homeowners out in the cold and bringing down property values, foreclosures have become a harsh reality for homeowners across the country as the housing market struggles to regain firm footing.

For rent signIn the other corner sits the Federal Reserve, armed with a new policy hoping to deliver a critical blow to the foreclosure mess that has depressed the real estate market.

What exactly is the Fed’s strategy? Turn lender-owned foreclosed properties sitting on the books into rental properties. Furthermore, the Fed said that lenders could possibly be entitled to Community Reinvestment Act Credit for providing housing to people of low-to-moderate incomes by turning these foreclosed properties into rentals.

The Fed’s heart is in the right place. The aim is to stabilize the market and these new guidelines can help do so by getting rid of many of the barriers preventing  the conversion of foreclosures into rentals.

“Banking organizations should make good-faith efforts to dispose of foreclosed properties,” the Fed declared in a six-page statement released last week.

By converting foreclosures into rentals, the banks, according to the Fed, must comply with all applicable federal, state and local laws and regulations including landlord-tenant laws and property maintenance standards, among other aspects.

So who is waking up at the crack of dawn to buy up these rentals?

Wall Street hedge funds and private-equity firms eager to reap the benefits that steady cash flow rentals provide.

While the thought of letting Wall Street back into the housing market sends chills down the spines of many people, it could help the market reach a bottom by turning these foreclosures into rentals, which would improve property value in the area.

According to RealtyTrac.com, there are over one million foreclosed homes in the country as of February 2012 with just over 13,000 in Illinois.

“If you have a lot of foreclosures in one community you will improve everybody’s home values if you take them off the market,” said Diane Swonk, the chief economist at Mesirow Financial said to the New York Times. “If those homes are renovated and even rented, it is a lot better than having them stand empty.”

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

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