What would you say if I told you that someday soon, you could remain in your home for up to five years following a foreclosure on that very same residence?
Next, what if I also told you that your new landlord would actually be that lender that foreclosed on you?
You're probably thinking that I've either totally lost my mind OR I'm talking about H.R. 5028: The Right to Rent Act of 2010. While I am certifiably insane, not even I could conjure up such a piece of legislation…but that's why we have Congress. Here are some of the (ahem) highlights of the bill:
- For residents who have occupied their homes for two years
- Had a loan originated before July 1, 2007
- Had a purchase price prior that is below the median home price for the MSA the home is located in
- Rents are set to "fair market value" by an appraiser (see – here's job Realtors won't take from you Appraisal Institute)
- HUD will oversee the lenders who will become the landlords
- The lenders will have to inform the residents that this program is available and it's at the discretion of the foreclosing homeowner whether or not to become a tenant.
One final note: the program would expire in five years after passage. No…this isn't a bit from The Onion but rather a real piece of legislative genius sponsored by Rep. Raul Grijalva (D-AZ) and co-sponsored by Rep. John Conyers (D-MI), Rep. Marcy Kaptur (D-OH), and Rep. Diane Watson (D-CA). If there's one bit of solace we can take from the bill's sponsor is that in his four terms in office, NOT ONE of the bill's he sponsored (25 according to OpenCongress.org) has ever made it into law. However, if there was ever a time when a piece of legislation would make it into law, it would in the situation where all of the sponsors and co-sponsors are facing re-election in 2010 (coincidence?).
Ok, politics aside, this is garbage legislation and further evidence that the folks on Congress haven't a clue on how to fix the "housing crisis." If this bill were to pass into law, there would be very little stop folks on the lower end of the housing market from defaulting to become renters. Why even bother modifying a loan when you can just rent and you get a stay for five years? No worries of maintenance, general repairs, etc. The condo market would be in shambles – more so than it already is.
There are huge benefits to home ownership, chief among which are pride in the home and pride in the community. Homeowners are concerned about their investment because they want to see a return someday for their hard work and equity. Most often, homeowners are plugged into their neighborhoods and community for similar reasons.
Finally, consider the time line on this bill. If it were to ever see the light of day, we would be experiencing a double or triple dip in the housing market from the lenders finally able to foreclose and sell these liabilities.
HEY…JUST A SEC…I GOT IT: A defaulting homeowner could get foreclosed upon, rent for five years, and when the lease is up, purchase the home BACK from the bank that foreclosed in the first place. This bill isn't stupid, it genius!
Sarcasm aside, this is just further evidence that the folks making the rules have ZERO clue about economics, real estate, and what we're up against. What are your thoughts?