H.R. 5028 also known as the Right to Rent Act of 2010 was introduced April 15th by Representatives Raul Grijalva (D – AZ) and Marcy Kaptur (D – OH) as a means “To allow homeowners of moderate-value homes who are subject to mortgage foreclosure proceedings to remain in their homes as renters.”
According to Representative Grijalva’s press releases ([http://grijalva.house.gov/index.cfm?sectionid=13&parentid=5§iontree=5,13&itemid=582] and [http://grijalva.house.gov/uploads/R2R_2010.pdf]) , the bill is designed to allow homeowners facing foreclosure to rent the home back from the lender rather than being evicted while the bank is foreclosing. “The bill aims to give relief to middle-income homeowners, not speculators or people living in unaffordable mansions.” To qualify, the home must be the family’s primary residence for at least two years, the home must be equal to or below the median home price for the metropolitan area, and the mortgage must have been originated before July 1, 2007. Upon receiving a notice of foreclosure, the homeowner, may elect to rent for a term of up to five years at a rent determined by an appraiser.
The credit for the idea of “right to rent” along with the rules that seem eerily similar to those set forth by H.R. 5028 actually belongs to Dean Baker, the co-director of the Center for Economic and Policy Research. Mr. Baker’s idea of “right to rent” was introduced in 2007, when the idea was actually better suited to be implemented in helping distressed homeowners as well as reducing the impact of home value deterioration (http://www.guardian.co.uk/commentisfree/2007/oct/23/therightbailout).
The original article discussed the merits of keeping families in a home, maintaining the integrity of the neighborhood, all the while not requiring a government bailout:
“It is possible to help these families without any big bailouts or new bureaucracies…so that homeowners facing foreclosure will have the option to rent their home indefinitely at the fair market rent…The appraiser would determine the fair market rent…”
“This measure would ensure that current homeowners could at least keep a roof over their head…”
“This own to rent provision can be limited by both the date of issuance of the mortgage, and the value of the home…the own to rent option can be restricted to mortgages issued before July 1 2007…”
“To ensure that only less affluent homebuyers benefit, it can be restricted to homes that sold for less than the median price in an area…”
A variation of the “right to rent” was implemented by Fannie Mae in November 2009 and subsequently by Freddie Mac. Fannie Mae’s “Deed for Lease” program allows the homeowner to lease the home back from the lender for a twelve month period (the lease may be extended beyond the initial twelve months on a month to month basis) after giving the home back to the lender by completing a deed in lieu of foreclosure and meeting other criteria.
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by Dan Krell
© 2010