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]]>In April, progressive congresspersons Rep. Raúl Grijalva (D-AZ) and Marcy Kaptur (D-OH) introduced the Right-To-Rent Act of 2010, H.R. 5028. Millions of families are still facing foreclosures and Rep. Grijalva’s bill would let foreclosed families stay in their homes as renters at a fair market rate set by a judge. If banks don’t want to become landlords—and they usually don’t—they would now have a big incentive to renegotiate the terms of the mortgage that truly helps the owner.
After the taxpayer bailout of the Wall Street banks, rather than designing a program exclusively focused on homeowners, the Obama administration chose to set up a bank-friendly initiative called HAMP, the Home Affordable Modification Program—a public-private partnership where the lender doesn’t have to make any changes to the mortgage unless they determine it in their best interest to do so.
Since the program began, more than three million homeowners have become eligible for assistance. In turn, mortgage servicers have reached out to these borrowers, initiating the modification process. Roughly 760,000 homeowners have received loan modifications on a trial basis. But just 31,000 modifications have been made permanent.
That’s a success rate of just 1% for permanent loan modifications. This means that the majority of eligible homeowners are still struggling with their mortgage payments. So far the average homeowner in the program is saving more than $500 a month but, homeowners who receive permanent reductions in their monthly mortgage payments end up deeper underwater than they were before they were “helped.” Meanwhile, lenders and investors continue to foreclose on properties at a record pace.
U.S. bank repossessions increased 38% in the second quarter from the same period a year earlier for a record total of 269,952, according to Irvine, CA research firm RealtyTrac. That was also a jump of 5% from the previous quarter. If that pace continues through the year, the number of homes taken by banks is likely to top 1 million by the end of 2010.
A progressive approach to a deepening crisis
Rep. Grijalva offers a creative, common-sense solution to the foreclosure crisis that focuses first on the needs of homeowners, while also being fair to the banks. Dean Baker, co-director of the Center for Economic and Policy Research in Washington DC calls the bill “one of the most efficient and simple ways to help millions of families facing foreclosure remain in their homes.” Here’s a summary of the bill:
The Right to Rent Plan:
The best thing about Right to Rent is that, in these troubled economic times, it gives homeowners and families security in their homes. They will be able to live there for a substantial period of time—letting their children stay in their schools, giving them time to get on their feet, and prepare for and plan their next move. It would stem the current displacement of families and stabilize neighborhoods, which would go a long way toward stabilizing the real estate market. And another thing: It would show voters that Democrats, and government, really can help.
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