The biggest U.S. mortgage servicer will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property. The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co. (WFC), Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Fannie Mae are conducting or considering their own programs.
Disposing of repossessed homes is one of the biggest headaches for lenders in the U.S., where 1,679,125 houses, or one in every 77, were in some stage of foreclosure as of June, according to research firm RealtyTrac Inc. of Irvine, California. The prospect of those properties flooding the market has depressed prices and driven off buyers concerned that housing values will keep dropping
“No one needs these homes, no one is going to buy them,” said Christopher Thornberg, founding partner at the Los Angeles office of Beacon Economics LLC, a forecasting firm. “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.”
Donating a house may create an income-tax deduction, said Robert Willens, an independent accounting analyst based in New York. A bank might deduct as much as the fair market value if a home wasn’t acquired with the explicit intent of knocking it down, he said.
Wells Fargo and Fannie Mae already started donating houses and demolition funds in Ohio. San Francisco-based Wells Fargo, the biggest U.S. home lender, gave 26 properties and $127,000 to the Cuyahoga land bank, said Russ Cross, Midwest regional servicing director for Wells Fargo Home Mortgage. Since 2009, Wells Fargo made more than 800 donations, the bank said.Read it all