RISMEDIA, June 22, 2009-(MCT)-Bank of America is giving cities, not private buyers, the inside skinny on new foreclosures.
The nation’s biggest mortgage lender and servicer has come out with a new way of working with states and cities like Chicago that are receiving Neighborhood Stabilization Program grants from the U.S. Department of Housing and Urban Development.
If it all works according to plan, the result may be that cities have an easier time buying foreclosures, redeveloping them and then reselling them to homeowners in neighborhoods hardest hit by the housing crisis.
It also gives communities an upper hand in buying a foreclosed home cheap, before it’s snapped up by the investors that already are starting to surface in some neighborhoods. Under one important facet of the program, Mercy Portfolio Services, which is coordinating the NSP program for Chicago, will receive notice of a Bank of America-owned property that’s available for sale before it’s listed on the multiple listing service of Midwest Real Estate Data LLC. That’s considered key. Cities also will be able to get “real time” access to the bank’s real estate owned (REO) property lists through a dedicated website.
In many respects, it is an extension of the “first look” and “bulk purchase” programs that the National Community Stabilization Trust has already established with large lenders.
Also, communities will be able to buy multiple properties in a single transaction and Bank of America will designate one employee as the “point person” for a community, in an effort to streamline the process.
Theoretically, that should speed the process of moving foreclosed homes from banks to developers and homeowners, something that would be a win for the bank and for communities.
“The sooner we can get a property, the better,” said Katie Ludwig, manager of finance in the city’s Department of Community Development. “The less time it’s vacant, generally the better condition it will be in. If we can get properties sooner, before some of the investors out there, we would like that.”
Chicago, which is receiving $55.2 million of the $3.9 billion in federal stabilization funds, already has identified 25 areas on the city’s West and South Sides that it will target with the funds. The city hopes to use the grant to help with 2,500 homes during the next three to five years.
It has not acquired any homes yet, but hopes to make its first purchases early this summer, Ludwig said. Right now, the city is getting in place its pool of developers that will help recycle the real estate.
Currently, Bank of America has 300 REOs within the city. That’s a blip on the radar screen compared with the almost 3,000 REO properties in Illinois last month, according to data from RealtyTrac.
Still, even baby steps in the right direction can be considered positive, particularly since foreclosure trend spotters say more consumers are likely to lose their homes given the nation’s 9.4% unemployment rate.
Bank of America, the owner of Countrywide Financial, services one in five residential mortgages nationally.
The bank’s intention with the program is to remove talk about price from initial conversations between it and cities. Rather, cities can scroll through lists of properties, some of which have prices because they are formally listed for sale and others that have no price yet, and contact the bank about interested properties.
On a case-by-case basis, the bank will come up with a price or offer the home at a price lower than has been advertised on the multiple listing service. There’s no wheeling and dealing; it’s a take it or leave it offer, said Rob Grossman, senior vice president of community affairs for Bank of America.
“We’re balancing our desire to work with communities that are struggling to stabilize with our fiduciary duty to the investors that hold the paper on all these properties,” Grossman said. “We will offer them the best price.”
Knowing that some REOs just aren’t salvageable, the bank also is working on a pilot to dispose of the worst REOs on its books by donating or selling the properties to cities in exchange for having them demolished. The program may come to Chicago, Grossman said.
Copyright (c) 2009, Chicago Tribune
Distributed by McClatchy-Tribune Information Services.