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Federal Reserve Issues Guidelines For Turning Foreclosed Homes Into Rentals

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WASHINGTON -- The Federal Reserve has issued policy guidelines for banks turning foreclosed homes they own into rentals, a trend that could help boost falling home prices.

The central bank said Thursday that banks making the conversions should preserve needed documents and meet all federal, state and local laws that apply to renting.

Fed Chairman Ben Bernanke and other Fed officials have said that with home prices continuing to fall and rents rising, it makes sense for some foreclosed homes to be converted into rentals. Demand for rentals has grown since the housing meltdown.

Sales of millions of foreclosed homes are resuming since the government's settlement with the five biggest mortgage lenders over lending practices. Homes in foreclosure sell at a 20 percent discount on average.

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