TAMPA, Fla. — A program called Fresh Start is benefitting the Florida housing market, local consumers, and credit unions, say two CUs that offer the lease-to-own program on foreclosed properties.
"It's another tool to help stabilize the housing market here," said Jim Simon, VP of loss mitigation for the $6-billion Suncoast Schools FCU in Tampa, which recently announced plans to merge with $2-billion GTE FCU. "We totally understand that many people have been impacted through no fault of their own by the economic conditions. They're getting foreclosed out of their homes. Some are being bounced from rental to rental because the owners of the rentals are being foreclosed on. Fresh Start helps these people establish a new foundation within an 18-month period."
Fresh Start is headed by the Ft. Myers, Fla.-based Chang Group and helps consumers rebuild their credit as they rent so they have a better opportunity to purchase the home at the end of the lease (see related story).
With more than 100 foreclosed properties on SSFCU's books, Simon said Fresh Start is turning non-performing assets into revenue-generating instruments.
"There is an expense to maintaining REO property," Simon reminded. "There is also, in addition to the just the normal carrying costs, vandalism and leaking air conditioners. Having someone occupy the property is certainly a benefit. You get some cash flow, and in the end you break even."
Simon explained that the money the credit union has already spent carrying a home up to the point a Fresh Start lease begins may be recouped by the end of the lease, given the rental income and the savings from not having to pay taxes, insurance, and maintenance.
At the close of the lease Suncoast also hopes to have a new member and a performing mortgage. "It's much easier for us to underwrite the mortgage when we have experience with the home and the renter," Simon said. "It's an easy process just to convert them from the tenant to the owner of the property and everyone moves forward with life."
Calif. CU Also Considering Program
In Fairfield, Calif., the $126-million Solano First FCU has nine homes in Florida it needs to move as a result of participations with now-defunct Norlarco Credit Union, whose real estate scheme led to its failure and eventual sale in early 2008.
"Given the circumstances, I think it's a good way for us to get out from under a bad situation," said President and CEO Russell Hatch. "It's also a way for people in Florida to realize something that might not have been attainable for them a year ago."
Hatch prefers Fresh Start over a standard rental agreement because, "Fresh Start renters have a greater interest in the property than your typical renter. They will take better care of the home."
