Banks to allow local groups to buy foreclosures

Major banks are agreeing to give local governments and nonprofit groups the ability to buy foreclosed homes before they are sold to private investors.

The Obama administration said Wednesday local officials could benefit from acquiring these properties and renovating them or using the land for redevelopment projects. Congress has provided $7 billion to buy the homes, but these groups are struggling to spend the federal money because they are often outbid by speculators who are snapping up foreclosures.

"The fear is that they will purchase the property, make very minimal to no improvements on it, and either put it back on the market as a rental unit or let it sit waiting for the market to come back," said Sarah Greenberg, senior manager for community stabilization at NeighborWorks America, a nonprofit housing group.

The administration says the largest mortgage lenders in the country, including Bank of America Corp. and Wells Fargo & Co. have agreed to let the groups purchase the properties ahead of private speculators. The neighborhood organizations will have up to 48 hours to evaluate them.

"This agreement helps us level the playing field to give communities a better chance to stabilize these neighborhoods," Housing and Urban Development Secretary Shaun Donovan said in a statement. Donovan said about 100,000 properties are likely to be sold through the program.

A nonprofit group, the National Community Stabilization Trust, will collect information about foreclosed properties and help local groups to identify which ones to purchase.