The biggest US mortgage servicer, the Bank of America, is adopting a different approach towards foreclosures and abandoned properties, which includes demolishing the most decrepit of them.
It's donating 100 foreclosed homes in the Cleveland area, in conjunction with a local agency which manages such properties, and in certain cases will contribute towards their demolition. Future cities to benefit from this plan include Chicago and Detroit, and it probably won't stop there, as there are plans to add an additional nine cities by the end of the year. JP Morgan Chase & Co., Wells Fargo & Co., Fannie Mae and Citigroup Inc. are either already carrying out or considering similar programs.
During the first quarter of 2011 the Bank of America had 40,000 foreclosures, leaving it responsible for maintenance costs and taxes, and a massive 1 in 77 properties in the US are currently in some stage of foreclosure according to RealtyTrac Inc. This is holding back recovery as potential buyers are reluctant to buy over concerns that housing values could continue to fall.
The company works closely with lenders, homeowners and government officials to help salvage vacant homes.
Under this latest scheme lenders will have to pay up to $7,500 for demolition, although in areas which are eligible for the federal Neighborhoods Stabilization Program this figure falls to just $3,500. Future uses for the bulldozed space include urban farming and development. Some of the properties most likely to be bulldozed are worth less than $10,000 and are either uninhabitable or would cost too much to renovate.
The current view, which is probably accurate, seems to be that no-one would ever buy these homes, and they are surplus to requirements anyway. The Bank of America cannot cover its losses, but at least by giving them away these losses may be considered to be tax deductible.