Sunday, November 29, 2015

Renting better than foreclosure for homeowners

In a pilot program so small it is little more than symbolic, Bank of America is handling some of the trouble it and other lenders created: an overabundance of empty houses.

Renting better than foreclosure for homeowners


In a pilot program so small it is little more than symbolic, Bank of America is handling some of the trouble it and other lenders created: an overabundance of empty houses.

The bank will pick fewer than 1,000 families in Arizona, Nevada, and New York on the verge of foreclosure. They will be asked to surrender the titles to their homes to have their debts forgiven,  and then pay rent.

This is no acknowledgment of the hurt that the mortgage industry put on the nation’s economy, individuals, investors, and entire neighborhoods. It does not erase the egregious behavior of Bank of America and its subsidiary, Countrywide Mortgage.

They were among the worst of reckless lenders, giving mortgages to people they knew couldn’t afford them and putting taxpayers and other homeowners on the hook when the bubble burst.

Good idea for Bank of America to let homeowners at risk of foreclosure become renters?
Yes, better than making people homeless
No, unless underlying money woes addressed, people won't pay the rent
Yes, makes a change from BoA foreclosing on people who've paid off their mortgages
No, better to get those homes into new owners' hands

The rental option came out of the  $26 billion settlement agreed to by federal and state law enforcers and five lenders following charges that people were kicked out of their homes based on forged or incomplete foreclosure documents.

The program is a good idea because it keeps homes occupied, lets families stay in their communities, and keeps children in their schools.

Advocates have long pushed the idea of converting troubled homeowners into renters to break the traumatic effects of foreclosure. They argue correctly that not only are borrowers hurt, but so are their neighbors when they have to live next to empty, and often vandalized, houses, which depress property values.

Of course, the rental program is good for the bank, which saves on foreclosure costs and earns rent money from a house unlikely to sell in a sluggish market.

This pilot can help stabilize families and towns that have already suffered too much in the mortgage crisis. Other lenders should consider starting similar programs.

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