A simple, no-cost way to stop the tsunami of foreclosures that are undermining the economy:

[Are_grits_groceries]

From Greg Kaufmann at The Nation:
<snip>
RIGHT TO RENT: The Obama administration's attempt to bribe, cajole or beg the banks to modify mortgages isn't working. There were 367,056 foreclosure filings in March, a monthly record. In the first three months of the year, the safest borrowers accounted for nearly 37 percent of new foreclosures. That's why the Right to Rent Act, introduced by Democratic Representatives Raúl Grijalva and Marcy Kaptur, is so timely.

It would allow a family that receives a foreclosure notice to remain in their home as renters under a five-year lease, paying a fair-market monthly rent. The proposal was first suggested by progressive economist Dean Baker and has been endorsed by experts across the political spectrum.

"We have asked time and again for banks to work with the American people to do loan workouts," Kaptur says. "With nearly 6 million people delinquent on their mortgages and at risk of foreclosure, we can no longer afford for banks to continue turning their backs on the American people."

"The administration's approach is simply an insufficient response to this historic crisis," says Grijalva. "Right to Rent is a fair and sensible solution. Banks will get reliable rental income, and families will be able to stay in their homes and significantly lower their monthly housing costs."
<snip>
http://www.theygaveusarepublic.com/

We bailed the banks out and they continue to refuse to help homeowners. This solution beats the alternative. The way it is going you have empty houses, families in dire need of some place to stay, upheavel for people even if they do have jobs, kids caught in an educational nightmare as they are forced to move and/or live in less than desirable circumstances, and on and on and on.

If some people who others deem not worthy of a helping hand because they got in this mess by themselves do get aid, then so be it. the consequences for the whole nation if the foreclosures continue are long lasting and extremely damaging.

[snappyturtle]

1. K&R I hadn't heard about this. Thanks for posting. Great idea. nt

[juajen]

2. Not sure I understand this. Would the bank then be responsible

for taxes, insurance, house repairs, etc. I don't understand how monthly expenses would go down. Someone has to pay this, and I know rental prices in my neighborhood are higher than my mortgage payment; so, how does this save the former owners of the house money?

[Are_grits_groceries]

3. They won't get thrown out of their houses.

In addition, fair market rent could be more complex than just the neighborhood. That would be key.

It's worth trying and modifying if need be.

Some cases have shown people who could pay off their debt and other factors. They were denied any extension because it was too late.

[KharmaTrain]

4. A Legal Nightmare...

I like the concept but see it full of legal pitfalls. Reminds me of the attempts to prevent apartment owners from turning their units condo over the past 30 years. The rub here is that the federal government has no right to encroach on private property ownership or impose conditions on the sale or use of that land. To force the matter, they'd have to seize the property or come up with some extra legal method of forcing an owner to rent vs. sell.

In many ways the marketplace is handling the rental problem...at least somewhat. As its hard to get the credit for a condo, owners are having to deal with their own foreclosures and high vacancies. Rentals in this area are up for the first time in years as empty condos are flipping back to rentals. If the economy remains in the doldrums the demand for rentals will only go up.

Lastly, the banks don't want to rent...that requires them to play landlord and that's not their thing. Forcing them to rent may sound good, but how about if they do find a buyer...is that buyer required to keep renting as well?

If you want to increase affordable rentals, the government can do it other ways. Low ocst loans and tax breaks for anyone who buys a foreclosed property and then agrees to rent it. Stimulating the market to chance will make things happen a lot faster than trying to ram through bills that are sure to take years to get through Congress and then even longer court challenges.

[Are_grits_groceries]

5. In the meantime,

as they dither and waffle about how to help, people get turned out by the thousands. Sorry, I don't believe the housing market or the job market will recover enough in time to help a lot of people.

I'd rather the government not try to run everything either. I'd much rather that people had a roof over their heads during these uncertain times though.

All of us are going to pay for this one way or another as the overall economy is affected. Lots of jobless and homeless people will make the situation worse. If you don't have a place to live, it's a double whammy because it is harder to find a job if you are.

They certainly had no qualms about scaring laws out people's hats when it came to TARP and bailing out the banks.

[KharmaTrain]

7. We're Paying For It Already...

I think alot about my parents these days...Depression kids of the 30s who prospered in the 50s and 60s...and how they'd view what's going on now. Assuredly, they'd agree that the economy is in the worst shape since the 30s and the immediate outlook isn't good.

The big problem is our economy is broke. Flat broke. The banks, the government...lots of paper, not the capital to back it up. The government could print more money and then we get the horrors of inflation...instead it's building up the defecit that means higher and higher debt that will have to be addressed later. Pick your poison.

While I see the government negligent on regulation, I don't like the concept of them moving into private markets and trying to solve each and every problem. Regulation can make a free market a fair one...help generate competition that is the incentive for businesses to grow, create jobs and then banks are more likely to loosen credit. But we're stagnant...we're not losing jobs, but we're not gaining.

If the government is to be a positive agent of change, it's through incentives and "investment"...for example, I'd like to see an emergency spending bill or some kind of ammendment to the upcoming budget that earmarks $10 billion for alternative energy development and tax breaks. Make it cheaper to get solar panels, build wind farms, develop liquid hydrogen and electric engines...creating jobs along the way.

There's no simple, quick fix...and while TARP is a political tar baby on both sides, many banks have repaid those loans and I recently read the government ended up with a profit. That's not the root of the problem...it's the lack of accountability and regulation enforcement that allow the corporates and banks to continue to play games and job the system.

Cheers...

[alc]

8. great post

I know about 15 people who used to own rental properties, but it got to be too much of a hassle so only 2-3 still do. If they can fix the laws/taxes to encourage people to buy the foreclosures with a promise to rent back to the current owners I can see a lot of people doing that. I'd guess you can come up with rent-back and sell-back clauses that both sides will find acceptable.

The additional benefit of doing it this way is that banks will have the money to lend again. If you require banks to rent back then they have money tied up in the property that is not available to lend for other purposes.

[BR_Parkway]

13. Do you remember when the Feds said "set hwy speeds at 55 or lose

your federal highway funds"?

They could do similar with the banks - make it a condition of having FDIC insurance or access to the Fed's discount window (where we are still letting the banks take money for almost 0% interest to loan back to the Treasury)

[KharmaTrain]

14. A Little Tricky...

I like where you're headed, however, unlike highway funds which is almost all government funds, the relationship with the government and banks are a bit more complex. But restrictions on what they can borrow and they won't or they'll find other places. Right now the government needs to sell T-bills and other "instruments" to off set the defecits and get the cash. It's even more important these days as tax revenues from payroll and corporate taxes continue to be very soft and the tax cuts and high un and underemployment (combined with lessened consumer spending) has hurt the overall tax base as well.

Penalizing or punshing isn't going to get things moving...incentives will.

Cheers...

[aikoaiko]

6. If fair rental market is already below mortgage rates, doesn't this mean there is already affordable

housing available to those foreclosed? They just have to move. A couple of months of not paying their mortgage should be able to cover the costs of most moving companies and setting up in a new apartment.

:shrug:

[thecrow]

10. How do you get an apartment if you have no job?

That's why people are stuck in their own homes.
Besides, like a poster upthread stated "Rent is more than my mortgage"

[aikoaiko]

12. But the proposal is that the foreclosed homeownere pay fair market rent for the house.

If rent is more than mortgage, how does this help them?

Getting into a small apt would be more affordable.

I guess I'm having trouble seeing how this proposal really helps.

[Mimosa]

9. K&R a 1000000 times if I could n/t

[dkf]

11. I've thought about this before and this won't work.

Banks aren't in the business of renting because there is too much potential liability in being a landlord. A person falls because of an uneven sidewalk on the property and they can sue for punitive damages. Banks aren't equipped to be property managers and rentals come with many obligations from the landlord like making sure things work properly and are safe.

Is congress going to rewrite rental laws and procedures in order to make this happen?

And let's face it. Many of these people can't afford rent either. They are surviving because they have no housing costs.

[Are_grits_groceries]

15. Alrighty then.

Apparently, once again it's impossible to help a lot of people who are hurting and will do so a lot more if they are thrown out of their houses.

Won't work. Nope. Won't work. Illegal and all that somewhere. Don't punish. Don't penalize. Can't tie their money up. Might need it for something else. Nope. No. No. NOOOOOOOOOO.......

There are some problems that you may have the luxury of a little time to work out a nice, neat proposal that will suit all.

Then there are those times when something needs to be done right now. It might not have been right now for some of these people if the banks hadn't refused to help restructure their mortgages or take other measures to help.

For those who jump on the 'can't or won't work' bandwagon, please go with the people who lock people out of their homes and throw them out.

Or call some of these families on the edge and explain what the problem is. Give them the reasons and the technicalities that are in the way. Tell them to wait for the markets to work it out.

I doubt if a lot of them have left any stone unturned they can think of. So they turn to people who either gave or got the money they helped fund with their taxes because of TARP. These are some of the people who are now giving out big bonuses or have worked things out quite nicely for themselves.

Let them eat TARP. That should have been enough.

If I am a bleeding heart, it's because it is working and not turned to stone.

[hfojvt]

20. those are not the only options

you are setting up two false dichotomies. As if the only options are a) harebrained scheme that won't work or b) nothing. But I do not want to be derogatory towards the people with the idea. But just because they have a plan does not mean that a) it will work or b) that it is the only possible plan. Just because people are negatively evaluating an idea does not mean that they want to do nothing. It could mean that they want an idea that will work.

Thus your final line. Just because people do not support this idea does not mean that we don't have a heart.

[Are_grits_groceries]

22. I'm waiting for an option.

So far, all I have seen or heard is no except for one suggestion. I believe you if you do care. However, that is moot if nothing is done.

It isn't like this is one big surprise. This has been coming down the pike. After a lot of people are right on the edge, then the PTB act surprised. They are offended by somebody pushing them for help now.

It wouldn't be NOW, if it had been taken care of 'then.'

[Ruby the Liberal]

16. Problems with this:

Families are walking from their ownership in this case. Yes, they are not foreclosed and on the street, but if and when the market improves and housing prices increase(inflation), they are out. I would prefer to see loan modifications.

Second, the banks aren't in the business of being landlords. How long before they (1) shirk their responsibilities for (ex) plumbing issues, structural issues, etc, and dump to the highest bidder who is NOT under Fed rent controlled regs or (2) randomly raise fees on the rest of society because they are forced into operations that they aren't equipped to manage (rental maintenance)?

I love Marcy Kaptur and applaud her leadership on this topic (produce the note!) but we would be better served revaluing these properties and rewriting the notes.

This is a blueprint for a clusterfuck on several levels.

[Are_grits_groceries]

17. Okay

That's sensible solution. However, the banks won't talk to people about modifying their loans. They just ignore them.

Something has got to be done now. Modify the loans. At least it's an idea and not just NO.

I'm sure somebody will jump in with it though.

[Ruby the Liberal]

18. I am so beyond frustrated at this "save the homeowner" scam that I could scream

Sooooo many loopholes. Sooooo few 'qualify'. Those who do, see their credit destroyed.

I can appreciate flippers/investors polluting the pool, along with those who make $25k and have a $250k+ mortgage who were told was 'feasible' - but there HAS to be a way to mitigate those cases against people just trying to make it.

I just don't thin that turning owners into renters for 5 years (without the ability to recoup payments) is addressing this.

It is no doubt complicated, but there has to be a better way.

:(

[Imajika]

19. Why does something HAVE to be done?

"Something has got to be done now. Modify the loans."

Lots of people bought things they really couldn't afford, why does this demand a government solution?

I didn't buy a house I couldn't afford, did you? Why should the bank, government or anyone else bail out people who are living beyond their means. People that saved money, put 20% down on a property with a decent nest egg ready for emergencies are, by and large, keeping their homes.

People aren't just foreclosing because they are out of work, they chose bad loans assuming real estate would keep rising in value. People made bad decisions.

I am fine providing some reasonable assistance as we already do with unemployment benefits, help with COBRA, etc, etc, but why should we demand the private sector rent property instead of sell it? Renting is a headache too with it's own set of rules and responsibilities - banks are not equipped to deal with that. Also, have you considered that every time you make the risk higher for banks to do business that they will just raise the cost to consumers for loans.

This idea is terrible. It may be good politics to propose something like this, but it is an awful, unworkable idea.

[Are_grits_groceries]

21. Something has to be done now

because every day more and more people are foreclosed on. This will make it harder and harder for them to get back on their feet.

The private sector isn't very private when they want money on their end. Ask them to help the consumers, and then they clam up and talk about rights.

This isn't any ordinary economic cycle. People are out of jobs, health care, homes and other things. In a time like this, I would expect the government to step up.

They stepped up to save those on top because they rigged the system to fall if they were going under. they didn't care who lost money if it wasn't them. When they got caught, they hollered for help.

Guess what? The whole economy can crash from the bottom too. When people in lower income brackets are shifted further and further downward into one lump, then the unbalanced structure will fall.

This is like watching people near you when their houses are burning down. You can help them now and possibly stave off the spreading fire. Or you can watch because they don't deserve help. Nevermind that the fire doesn't care who you are. it will eventually get you too.

[Imajika]

23. The government simply can't solve this...

"because every day more and more people are foreclosed on. This will make it harder and harder for them to get back on their feet."

No, not necessarily. It may be a sad situation, but losing a house to foreclosure isn't the end of the world. Many people simply bit off way more than they could pay for. They bought houses they couldn't really afford and huge numbers are now upside down and in almost hopeless situations where that home is concerned. People will not be able to stay in homes they can not afford. That is just life. In many of the modifications that are being done, people are finding they STILL can't make the payments. What then? Just let them stay until they can? Free home? You know it isn't something that just sprouted out of the ground for free right? Someone has to pay for it.

What is fair rental value anyway? In many cases that is MORE than the mortgage payments. Who pays for the insurance? Who fixes things? Who pays the Homeowners Association fees? The banks? The banks are not rental agencies. They are not equipped to deal with that stuff.

You said this in your original post:

"kids caught in an educational nightmare as they are forced to move and/or live in less than desirable circumstances"

Less desirable circumstances? I'd like better circumstances but I didn't buy a bigger house than I can afford, I didn't get a terrible loan, and I saved up some money for emergencies. I mean, your talking about trying to bail people out from having to deal with less desirable circumstances? That is just part of life.

"This isn't any ordinary economic cycle. People are out of jobs, health care, homes and other things. In a time like this, I would expect the government to step up."

That doesn't involve forcing the people to rent homes instead of sell them. Your talking about blowing up the housing market because many people just bought way more home than they could ever afford.

Unemployment was worse in the early 80's. There are some people that are always dealing with these problems. It is part of life. Your never going to fix that.

"This is like watching people near you when their houses are burning down. You can help them now and possibly stave off the spreading fire. Or you can watch because they don't deserve help. Nevermind that the fire doesn't care who you are. it will eventually get you too."

No, it's not. That fire will burn down your house if you don't help put it out. If houses are foreclosed on it may lower your property value for awhile, but eventually the housing market will correct itself. You will wind up with a glut of available housing, the prices will come down, and people will be able to buy homes for much cheaper. Suddenly young families can actually afford homes that were previously too costly for them. That is how the housing market corrects itself. You can't take corrections like this out of the market.

I am for continuing to extend unemployment insurance, helping with COBRA, better regulation of banks, etc, but forcing banks to become rental agencies is just a terrible idea. Your also inviting all sorts of unintended consequences by keeping people in homes they really cant afford. That is the bottom line that there is no getting around - huge numbers of people simply bought property they really just can not pay for.

[Are_grits_groceries]

25. The banks are what they want to be apparently.

I must have dreamed it up about how bad the entire economy was and is. I guess I was hallucinating when Paul Krugman and others were so worried about a second depression. Many still are. The complete unrest all over the globe has to be a nightmare and nothing more.

I apparently slept through the 80's when this same type of desperation was at full tilt. I remember that there have always been problems, but I must be mistaken when I thought that this was way over the line.

I don't remember then being so worried about myself and many people I know who are in dire straits. They weren't exactly fine in the 80's, but they weren't on the edge of a cliff. BTW they didn't buy new homes.

Actually, I know I've been awake all the time. You can have your position and watch people fall in record numbers. I'll try to do something about it. I'm not as sure where the edge of the cliff is as you are.

[flvegan]

24. Even better: mandatory interest reset.

People are going to lose their homes in some numbers. Always has been the case. People lose jobs, encounter medical issues, etc. So many of the issues with foreclosures are directly related to the reset interest rates. Roll every loan back to 3% interest for the next 10 years. No novation to the Note, bank wins, homeowner wins.

[Are_grits_groceries]

26. That will help.

I know people lose their homes.

I think we are in a cycle this time that will be hard to stop because of a lot of unfortunate factors that are occurring at once.