The Right to Rent Act 2010 recently introduced on Tax Day and making its way to the House of Representatives, will allow homeowners of moderate-value homes who are subject to foreclosure proceeding remain in their homes as renters for up to five years.
Right to Rent Act of 2010 would basically prevent the homeowner from having to move out of the house they already live. The homeowners would remain in their house as renters paying fair market rent. Here's how would work: An owner-occupant, within a week of getting a foreclosure letter, can agree to pay "fair market rent," as determined by an appraiser under the oversight of a judge. As long as the owner--er, tenant--keeps paying rent (subject to adjustments to reflect market comparables), the lender or new owner cannot carry out an eviction "at will."
Its obvious that if a homeowner is foreclosed upon, they need to find somewhere to live. Whether they move in with relatives or opt to rent - they need somewhere to live. Which raises the question, can a troubled homeowner facing foreclosure, afford fair market rent? Assuming that fair market rent is lower than their mortgage, it's possible. If they can't afford fair market rent for the house that they live in now, then its obvious they would have to move. With that being said, just because they can't afford fair market rent where they currently live in doesn't mean that they can't downsize and afford the rent elsewhere.
What's the benefits of Right to Rent Act of 2010? There may be less foreclosures on the market; it helps the banks recover unpaid mortgage bills; and it allows foreclosed homeowners to remain in their house as renters. Allowing homeowners to remain in their house as renters is less embarrassing for them (they don't have to tell anyone they don't own the house any longer), its easier on children especially if school-aged, most likely the owner--er, tenant will still maintain the property and gives them up to five years to prepare and plan for a future move.
On the other hand, homeowners, instead of just walking away from their house, will now purposely default on their mortgage and be able to remain in their house as renters, paying less money to live there. After all, why buy the cow when you can get the milk for free?
Read more about the Right to Rent Act of 2010 on my Trulia blog.
What are your thoughts? If passed, its like just like a five year delay or stall until the empty, foreclosed homes hit the market. Delaying the inevitable? Banks as landlords? Interesting.......
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