April 5, 2012 / 8:12 PM / 6 years ago

Fed delivers policy reminder on foreclosure-to-rental rules

WASHINGTON, April 5 (Reuters) - The Federal Reserve on Thursday issued a policy reminder to banks that are turning foreclosed homes into rentals, and outlined existing guidelines which must be followed in dealing with the growing number of distressed residential properties on the market.

“Banking organizations should make good-faith efforts to dispose of foreclosed properties,” the Fed said in a statement. In light of “extraordinary market conditions,” the Fed said that renting out those surrendered properties falls in line with bank regulations on bank-owned foreclosed properties.

Many at the Fed have said creating more single-family rental properties could possibly curb declines in home prices that have fallen more than 30 percent from their peak in 2006. The Fed has also said lenders jumping into the rental market could reduce losses on foreclosed properties due to the growing demand for rental housing seen in many real-estate markets.

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