The rise in foreclosures in the housing market over the past couple of years has been bad news for most folks. It’s done horrible things to the credit markets at large, and has a lot to do with the overall financial crisis. The only folks who seem to be benefiting from foreclosures are those companies that sell renters insurance. (Even then, they’re losing out because many of the new renters insurance customers are their old homeowners insurance customers.)
This situation has taken a toll on families, too. As people are foreclosed, families are forced to move out of their homes and into rental housing. In some cases, these are the only homes that the family has ever known. Now, if two Democrats in the U.S. House of Representatives get their way, people who are facing foreclosure might be able to stay in their homes as renters for up to five years.
This bill, which is being called a “right to rent” bill, will create a scenario in which families could stay in the home. It would allow families that are looking at foreclosure to petition a judge to allow them to stay in the homes as renters under a lease with a term of five years. An appraisal would have to be done for the home to determine its rental value, and that value could, of course, rise oer time.
The bill’s creators argue that the bill will help address the housing crisis in a way that the HAMP program can’t by itself. The HAMP program was designed to help homeowners who are in crisis lower their monthly mortgage payments. After a few months of trial payments, the program would permanently modify the homeowners mortgages to the lower monthly rate.
Keeping families in their homes as renters will, in theory, help to stave off the decay of many neighborhoods. The families that stay in these homes would, in theory, continue to live in the home and treat it as their own. It would also provide banks who are looking at serious losses during a foreclosure to have some reliable rental income.
Under the bill, the homeowner must have been living in and owning the home for at lest two years. Home loans that were taken out prior to July 1, 2007 would qualify, but older homes would not. In addition, only homes that were purchased at or below the median value in their area would be eligible.
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