Plan Allowing Forclosed Families to Stay Put

by Andrea Hermitt | More from this Blogger

12 Aug 2009 11:42 AM

According to the Los Angeles Times a "right to rent" plan will allow homeowners to rent their forclosed homes back and stay put.

The basic idea is simple. In recognition of the extraordinary crisis, Congress would give families that took out mortgages at the peak of the boom and are facing foreclosure the option to remain in their homes as renters for a substantial period of time -- five to 10 years -- while paying the market-rate rent. Earlier this year, Freddie Mac launched a similar policy, giving former homeowners the option to lease their recently foreclosed properties, but on a month-to-month basis. That was a positive step, but it does not give families the housing security they need.

As of right now, this plan is just and idea. There are many problems with this idea.

First thousands of families have already lost their homes to foreclosures. What recourse would they have.

Many people are angry that their neighbors have stretched beyond their means to purchase houses in their neighborhood and are now losing them. This is killing their property value. This new plan could continue to decrease property value as a neighborhood with home owners would turn into a neighborhood with home renters.

Banks would be forced to retain ownership of the homes or sell them to landlords who would take over ownership of the homes and forced to keep on the tenant. I can imagine real estate moguls buying up these houses and refusing to maintain the homes in an effort to make a profit on the rent.

Sure there are some positive aspects to this "plan" as well such as blighted neighborhoods having occupied homes and hopefully the property value in some areas would not sink at fast.

Still alot needs to be worked out before this idea becomes good enough to even be considered.

Related articles:

The Housing Market and Home Equity

Home Swapping Instead of Home Selling

Wow... Times Are Tough

Learn more about Andrea Hermitt

Andrea Hermitt is a native New Yorker currently residing in GA. She has been married for over 16 years and has two teenage children.

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