AT THE HEIGHT OF THE HOUSING CRISIS, banks were besieged by legions of homeowners defaulting on their home loans. Millions lost their homes to foreclosure or short sale in the worst economic times since the Depression of the 1930s.

But what happened to all those houses? And where did all those families go that lost homes during the Great Recession?

One popular urban myth is that the banks are still sitting on thousands of vacant properties — the so-called shadow inventory.

Traditionally, single-family home investment opportunities were limited to mom-and-pop-type investors — folks like you and me who wanted to invest in real estate and would purchase a few properties.

But as the bottom approached for real estate values, a new breed of institutional investor started buying up single-family homes by the thousands. Real Estate Investment Trusts (REITs) emerged to buy, renovate and lease these properties.

REITs traditionally invest in commercial and large apartment properties. As demand for single-family homes increased, a new business model emerged, Two of the largest firms now manage more than 30,000 single-family properties.

American Homes 4 Rent is the largest new-breed REIT. Its website says it manages more than 23,000 single-family homes in 42 markets in 22 states.

The other big REIT, Starwood Waypoint in Oakland owns more than 10,000 single-family homes, with aggressive plans to invest in more properties.

The concept is simple: Buy distressed properties at a discount, modestly renovate them and lease them to long-term tenants.

Typically these companies buy properties through traditional bank-owned foreclosures and short sales. Now they’re looking at nontraditional property acquisition methods.

In September 2013, American Homes for Rent announced the formation of American Mortgage Investment Partners LLC (“AMIP”) to acquire and resolve residential mortgages. “We believe the opportunity to provide alternatives to foreclosure such as REO-to-Rental solutions will provide attractive and affordable alternatives to homeownership for many,” the company stated.

Starwood Waypoint announced last March that it acquired about 500 troubled loans from a money center bank, saying this was the sixth purchase of troubled mortgage assets by the company and its predecessors. They’ve purchased $356.6 million in troubled loans representing about $676.6 million in residential property.

At the height of the meltdown, when there was a dearth of available homes, these companies provided welcome relief, buying distressed properties and providing rental housing for those who had lost their homes.

That these companies are dealing with distressed homeowners troubles me. Is it the proverbial fox in the hen house? Will they really work so owners can keep their homes — or will they foreclose quickly when the opportunity strikes to pick up below-market properties?

Guy Benjamin (CAL BRE License #01014834, NMLS 887909) writes a weekly column for The Herald, offering general information on real estate matters. As it is impossible to address all possibilities and variations, he will try to answer individual questions by readers who contact him at 707-246-0949 or gbenjamin@rpm-mtg.com.

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