B of A To Become Potter’s Bank – A Slum Landlord

B of A aka Henry Potter

Seems B of A one of the “too big to fail” banks is piloting a program where in my opinion they will become slum landlords.  In 3 states, Nevada, New York and Arizona Bank of America is rolling out another new program to supposedly keep distressed homeowners in their homes by having them turn over the Deed to the property, deed-in-lieu of foreclosure.

GREAT, now we can have a bank be a landlord!  What’s wrong with this picture?  Reminds me of It’s a Wonderful Life and B of A is Henry Potter of Bedford Falls who owns the town.  This was a fictional character that I see a direct correlation with Bank of America and their sinister motives.

Banks have NO BUSINESS in real estate!  For years they have tried to infiltrate real  estate so as to get into the selling business and this in my opinion is a step to get their feet in the door.  I have not been impressed with people the banks have employed to “take care” of foreclosed homes over the years and now, these same companies will be given the business of managing the piloted rentals.  If this isn’t slum landlord and Mr. Potter all over again, I’ll eat my hat!

There will be some who say, isn’t it nice that Bank of America wants to help the struggling homeowner who they’ve turned down with loan modification (supposedly because the owner does not qualify), so the homeowner can stay in what use to be their home.  I don’t see it that way.  If B of A really was “that” nice, than why not offer a loan modification program that actually works for the distressed homeowner?  Too many stipulations and formulas that don’t work!

This lovely B of A pilot program per Diana Olick, of CNBC apparently is only for B of A loans,  there cannot be any secondary liens/mortgages (junior liens), the homeowner must be at least 60 days behind in payments, not responded to other alternatives (such as short sale, deed in lieu) not qualified for modification, be underwater, be at risk to foreclosure and live in the home.  The rental payment would be lower than the homeowner’s mortgage payment (so would a loan modification – just saying).

There were conflicting statements about what the rent would be, one statement from B of A says rent would be lower than the local rents and another statement indicated rent would be at the going rental rate for the area.  If the rents are lower than the going rate, then what investor do you know who would be interested in increasing his/her portfolio when this type of non-asset?  More importantly, if B of A plans on selling off these properties at some point after being a slum landlord, one can only assume the price to the investor would be low so why not work with the struggling homeowner at that same price in a “real modification?”

B of A’s pilot program, Foreclosure Alternative also goes further by saying that if this works B of A plans on selling these assets to investors, eventually.  Fabulous, we can be a nation of rentals and make some investor’s portfolios larger.  So, Bank of America eventually wants to sell off these homes to investors instead of making them available to home buyers.  WOW, sounds to me like Mr. Potter just got himself into the real estate business through the back door!

Don’t forget the millions of homes being bundled in quantities to sell to investors that was known as the “shadow inventory,” that the banks held and Fannie Mae held.

What are your thoughts?  Is this a good plan for homeowners losing their homes?  Do you see any consequences from this? Do you think it’s time government and banks step aside with all these hair brained solutions and let the real estate market take its course?

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