Bank-owned homes around Lincoln could see a future as rentals until the housing market turns around.

That’s according to Century 21 Select manager and broker Gene Thorpe, who said Friday that a top REO (real estate owned) agent in the area told him some banks are planning, for now, to rent out foreclosed homes in lieu of selling them.

This is a by-product of the housing boom mid-decade, according to Thorpe, since some former homeowners may not have been able to afford the homes they bought that were subsequently foreclosed.

Lynda Armes, a mortgage banker at Maidu Financial, said banks are selling foreclosed homes to hedge-fund groups, who then rent the homes to the owner who has been foreclosed on.

Armes said the hedge-fund groups get the homes “at discount.”

“Banks are bundling (mortgage-backed) securities and selling them to hege-funders in groups,” Armes said. “The hedge funders own the properties.”

“It allows the homeowner to stay in the home,” Armes said, because some homeowners “can pay rent but can’t pay mortgage.”

She said the housing market stability “depends on movement,” and allowing homeowners to rent their foreclosed homes “alleviates stress” on their part.

Mel Ewing, a Realtor with Arrow Realty, said he has seen banks renting foreclosed homes to homeowners, but said 95 to 99 percent of the time, the banks do “cash for keys.”

“When a home is sold at auction, and I show up the house with someone still living there, we offer cash for keys,” Ewing said. “It’s to help to transition to a rental property, in the case of a renter, and to fund the price of moving costs for a homeowner.”

Ewing said “cash for keys” is done to mitigate loss from the property, because banks “want the people out as soon as possible so the house can’t be damaged.”

When asked if banks renting homes out instead of selling them was a good idea, Ewing said “absolutely.”

“We need to keep everything stable, and if that’s a helpful tool, great,” Ewing said. “If it helps keep the property value up and whatever it takes to normalize our market again.”

Ewing said the market would be “normalized” when home prices “start showing an upward increase month after month.”

“Right now, they’re going up and down,” Ewing said. “I think it’s because of the unemployment rate and buyers might not want to go out and risk buying a home.”

Thorpe discussed what could be accomplished by banks holding onto bank-owned homes until the market improves, including preventing the cost of homes from dropping and giving displaced families a place to live.

Banks renting out foreclosures could help the market recover, according to Thorpe.

“If you do that, it’s not feeding the market so many housing prices stop dropping,” he said.

Thorpe said there have been 8 million foreclosures nationwide since 2005, which means there are 12 to 16 million people who either can’t afford to buy a home or cannot qualify to buy a home for four to seven years due to having their home foreclosed.

Thorpe expressed disappointment over some homeowners being sold property during the housing boom, including in Lincoln, who couldn’t afford it then or couldn’t afford their loans as they adjusted up with the changing economy.

“It’s not from the dollars and cents element, but just from the trauma, especially what the children went through,” he said. “A lot of what is wrong today today is based on what happened then. I was hoping the banks would leave the interest rates where they are so families could continue to stay in the properties.”