Bank of America Corp., the biggest mortgage servicer in the U.S. is donating and demolishing hundreds of foreclosed and abandoned houses it can't sell.
Disposing of repossessed homes is one of the biggest headaches for mortgage lenders in the U.S. According to research firm RealtyTrac Inc., as of June, 1,679,125 houses, or one in every 77 homes were in some stage of foreclosure. In the first quarter of this year, Bank of America had 40,000 foreclosures to maintain.
"There is way too much supply," said Gus Frangos, president of a Cleveland-based Cuyahoga County Land Reutilization Corp., which works with lenders, government officials and homeowners to salvage vacant homes. "The best thing we can do to stabilize the market is to get the garbage off."
The oversupply of distresses homes flooding the housing market has depressed prices and many believe discouraged perspective buyers concerned that housing values will continue to drop.
Partnering with different local agencies throughout the U.S. that manage blighted properties, Bank of America will not only donate the homes, but in some cases will also contribute to their demolition. According to a Bank of America spokesman, Rick Simon, the tear-downs are in varying states of disrepair, from uninhabitable to badly damaged, and are worth less than what it would cost to make them livable.
"No one needs these homes, no one is going to buy them," said Christopher Thornberg of forecasting firm Beacon Economics LLC, "Bank of America is not going to be able to cover its losses, so it might as well give them away and get a little write-off and some nice public relations."
Wells Fargo & Co, Citigroup Inc, JPMorgan Chase & Co., and Fannie Mae are conducting or considering their own similar programs.