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Foreclosures for rent

By Judy Martel · Bankrate.com
Monday, August 1, 2011
Posted: 3 pm ET

The sluggish housing recovery is prompting President Barack Obama to consider ways to take foreclosed properties off the market and rent them until prices stabilize. According to an article in the Wall Street Journal, home prices nationally were 7.4 percent lower in May than they were a year earlier, but when distressed and foreclosed properties are taken out of the equation, the percentage drops to just over 0.4 percent. Foreclosed and distressed properties account for nearly a third of homes sold each month. When homes are unloaded at "fire sale" prices, property values drop by as much as 20 percent, worsening the crisis by potentially pushing more homeowners into foreclosure.

The logic behind the idea to rent the foreclosed homes is that taking them off the market will allow falling home prices to stabilize somewhat, while the income from rent will cover expenses on the home until the housing market recovers. Rents have increased nationwide as home prices have dropped and the pool of renters looking for homes rather than apartments has increased.

One sticking point to the proposal is that the government would turn into a landlord -- a role it is ill-equipped to play. So there's some discussion about selling thousands of foreclosures to private investors who would agree to act as landlords.

Meanwhile, infighting among banks is further stalling any resolution to the foreclosure crisis. Wells Fargo and Citigroup have said they should pay less than Bank of America and JP Morgan & Chase for violations on how they handled home foreclosuresbecause they claim they had fewer delinquent mortgages and are not as culpable in the housing crisis.

Last fall, talks began among those banks, plus Ally Financial, the 50 state attorneys general, the Treasury Department, Justice Department and Department of Housing and Urban Development to address violations in how the banks acted in foreclosure proceedings.

How do you think the foreclosure crisis should be solved?

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4 Comments
Angie09
August 25, 2011 at 8:35 am

I do think it would be better to let private investor be the land lord and not the Feds. It should be guidelines as well.
1. If the previous home owner informed the lender, they were having problems due to loss of income or loss of a 2nd income, or laid off due 2 no fault of thier of own, allow them to rent for a time, then revisit allowing them to buy back the property.

2. Don't allow the foreclosure on the credit report deter them from renting to someone. Investigate as 2 what really happened and why.

3. The renter has to be accountable and responsiable for any and ally damages to the property. Work w/the HOA hand and hand to maintain the property as well.

4. The land lord has to respect the renter and vice verse.

john borst
August 23, 2011 at 9:14 pm

To be a good landlord one has to be:

A very good handyman
A people person
Give "reminder" calls on second of month in a 100% friendly manner
Rent only to people that can afford the rent
Be patient with tenants problems
Never enter without permission

J.

Denise
August 02, 2011 at 4:58 pm

If rents are lower than mortgages, then the original homeowner probably could have stayed there. Wasn't that the purpose of the government bailout/mortgage modification program? Just another waste of taxpayer money, without significant results. Our government is only good at giving our money away, without demanding accountability. Problems only get worse when Obama gets involved.

Homeless
August 02, 2011 at 9:38 am

I think the government should LEAVE IT ALONE! Ill-equipped is the understatement of the year! If they would have just let the market correct itself 2-3 years ago and kept their noses and taxpayer dollars out of the equation, this would not be as much of an issue. More people are foreclosing now because the government promised them all these stupid programs that were SUPPOSED to make banks work with homeowners. Then they allowed the banks to move along with no accountability and forcing people to drag out the situation for months or even years longer than they should have. If they would have left it alone, people would have lost their house two years ago and moved on. Instead they have spent countless hours and headaches trying to "work with" the banks. Dragging on the inevitable for two years.

Washington cannot even perform the BASIC FUNCTIONS of their job...like, BUDGETING. I certainly don't think they should be attempting to become landlords!

Already their assumptions are WRONG! "while the income from rent will cover expenses on the home until the housing market recovers" People who want to rent their houses on their own are unable to find renters that can pay enough to cover the mortgages and expenses that are based on the previously inflated home prices! Or is the government going to seek being excused from property taxes to lower the expenses? Who suffers then? The state and local governments and the schools!

Just let it play out and focus on cutting spending and balancing the budget and rebuilding our economy!