The Wauwatosa, Wisconsin-based Equitable Bank has shifted its strategy to address the growing number of multifamily residential bank forclosures on its portfolio. The change in the bank’s strategy is seen in how it handles the Mission Lakes condominiums located in the community of Okauchee.

The condominiums have been purchased by Equitable Bank through a sheriff’s auction for about $6.1 million after the property’s original owner, Mission Lakes LLC reneged on its financial obligations with the bank and accrued a mortgage balance of $8.2 million.

Equitable Bank President John Matter described the deal between the bank and Mission Lakes as a friendly foreclosure, adding that Mission Lakes gave its complete cooperation which resulted to a successful purchase by the bank.

Equitable executives believed that the bank will have a greater chance of earning huge profits if they hold the property and market units by an average of $260,000. They claimed that the strategy is more profitable compared with the bank’s original approach of immediately finding a buyer for the whole project.

Banks in southeast Wisconsin have been refining their strategies since the decline in condominium and single family housing sales affected new condominium projects, with some of them not having enough cash to complete the construction.

It used to be that banks purchased repo homes in a sheriff’s auction at big discounts and sold them to investors at a loss. But in the long run, the practice has greatly affected the financial performance of banks that some of them have started reviewing their options.

Tri City National Bank executive vice president Bob Orth said that banks do not want to have lots of bank owned forclosures properties on their inventory. However, the current overload of bank forclosures is a reflection of the deteriorating housing market in Wisconsin, Orth added.

He expected more condominium projects in Milwaukee to face financial problems which will force their lenders to decide the best way to recover their losses.

Meanwhile, Waterstone Bank is one of the banks in Wautosa hardest hit by the slow sale in the residential market. The bank incurred large losses in multifamily residences, especially for four-plexes and duplexes.

According to WaterStone Chief Executive Officer and President Doug Gordon, the bank currently handles nearly 1,000 bank foreclosures and is still trying to sell them in the residential market.