Monday Aug 03 2009
Plan could turn struggling homeowners into renters
By: Dena Kouremetis and Beth Mergens
In the face of mounting frustration over the nation’s foreclosure rate, the administration and Congress are exploring some alternatives for families suffering from the current housing crisis. One proposal that has emerged offers an easy and straightforward means to keep these families in their homes while helping to alleviate the foreclosure wasteland that has been affecting neighborhood quality — renting. The “Right to Rent Plan” was first proposed two years ago by Dean Baker, co-director of the Center or Economic Policy and Research, and was designed to allow families facing foreclosure to rent their homes back at the market rate for a substantial period of time. According to Baker, the plan, which requires no taxpayer dollars and creates no new bureaucracy, is a concept supported by Congressional members on both sides of the aisle and is poised to take effect immediately upon passage. In March 2008, Freddie Mac launched a similar policy as part of its REO Rental Initiative, giving qualified tenants and former owners the option to lease their recently foreclosed properties on a month-to-month basis. Right to Rent would give former homeowners the right to remain in the homes as renters for a more substantial period of time (up to five or 10 years), providing more security of tenure. The Right to Rent would give homeowners much more bargaining power when trying to work out loan modifications. The result? Far more homeowners may avoid foreclosure altogether, says Baker. He explains that this plan may actually keep people in their homes and also let them remain homeowners. He also believes that many banks will suddenly get serious about modifying loans if the alternative is being a landlord for five years. Many believe this plan will help neighborhoods keep occupants in at-risk houses, a better option than leaving them vacant. The public may be skeptical of programs that include bailout programs with modifications that involve public money. They may well feel that if they have been paying their mortgage, there is no reason to subsidize anyone else who fails to do so. However, Baker says that the Right to Rent Plan ensures that non-delinquent homeowners’ taxes are not being raised to support the plan. Writer Dena Kouremetis can be reached through her Web site at communic8or.com. Folsom Re/MAX broker associate Beth Mergens is available at 947-3993 or at FolsomLakeHomes.com.