Washington Is Mulling Over Proposals To Allow Borrowers To Either Rent Or Buy Their Foreclosed House

Washington is giving serious thought and mulling over two issues

. Should the borrowers be allowed to remain on as tenants after the completion of the foreclosure process? Secondly if they can afford it should they be given the option of buying back the house?

Before retiring for the August pause, the two parties in a rare show of unanimity passed the Neighborhood Preservation Act by means of voice vote. The co-sponsors of the bill were Reps. Gary Miller (Republican) and Joel Donnelly (Democrat).

The bill would do away with legal hurdles that are at present preventing federally controlled banks from negotiating long term leases, up to a period of five years, with the previous owners of the foreclosed units. It would permit the banks to open talks regarding purchase also by the previous owners.

Miller explained that this plan, if put into effect, would not cost the taxpayer anything while it would bring down the increasing number of foreclosed houses waiting to be sold. The physical conditions of the property would be maintained and ultimately this would bring about stability in the housing market that is lashed and battered by huge numbers of distressed houses for sale.

The plan would however be entirely dependent on the voluntary action of the lenders. But the legislation would be an encouragement to the banks to find out how it would better their financial outlook. By collecting the rent they could tide over quite a number of years and then sell it later when the market improved in about four to five years.

The banking lobby did not oppose the scheme but there was no dearth of critics. The Center for Economic and Policy Research of Washington thinks that a key defect in the plan is that the decisions lie solely with the lenders and banks; none other has a say. The group noted, If Congress does want to give homeowners the option to stay in their homes as renters. It will be necessary to pass legislation that explicitly gives them this right.

Those supporting the option of short sale remarked that by changing the banks into landlords would not work out satisfactorily either for the lenders or the foreclosed victims. Al Hackam a broker from San Diego who is a man of many years of experience. He felt that the solution is fine but it will not produce expected results if the banks call the shots.

by: Adam Sanderson

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