Should a Distressed Homeowner Get to Rent Their Home Back from the Lender?

A proposal being discussed in lender financial circles is whether an owner who has lost their home to foreclosure should be allowed to stay in the home, for up to 5 years at market rent. This proposal is a significant change from the current Freddie Mac REO Rental Initiative that allows current owners to stay as tenants on a month to month basis while the home is being marketed to potential buyers.

Part of the reason behind the proposal is the number of vacant homes sitting empty in neighborhoods across the country is rising. The vacant properties are becoming run down, lowering property values in entire neighborhoods. But is allowing the owner who couldn’t pay their loan the right way to solve the problem?

When we look around and see teachers, police officers, fire fighters and other deserving public employees who are still priced out of some markets I wonder why wouldn’t we offer them a chance at the property first? A lease to own program that gives them credit for their years of service and a reasonable market rent with a percentage going towards their down payment. There are some programs in place offering assistance to our public employees but certainly there are more who deserve the opportunity to become homeowners. Why not more government programs to support putting them in one of these foreclosed properties?

Perhaps I’m missing something in this new proposal that answers the question as to why a foreclosed homeowner will get a chance to stay in a home that has cost their lender thousands in missed payments and their neighbors even more in lost property value.

What is the rest of the story here?

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