Fixing foreclosures with a right to rent

Check out http://www.obamamortgagerelief.org/ . There needs to be a program for the elderly but not quite to retirement age for mortgage modification when the have lost their job during this particular recession. I made a decent wage because I put my time into a company and now have no job. I am looking at $10 – to $12 hr jobs after working all my life. You can't make a mortgage payment on that kind of money. I will eventually lose my home.

Would everyone just stop arguing about it and give me free medical care for life? And, I want my mortgage balance reduced… No, come to think of it, I don't want to make payments any more but I'm going to live in the house anyway. While you're at it, give me free prescription drugs and $4,500 toward a new car. Sheesh, it's not like you rich people don't have the money.

To David Albany NY Posting August 17 2009
What value is the government going to add?
====================================
The Government needs to protect the borrower from the lender. The Borrower has no rights.
Congress has licensed or chartered the banks to lend mortgage money at will and without constraint. Therefore the bank has no fear of the borrower because the borrower has no rights,
Conversely Congress has enacted NO legislation that gives the borrower the legal right to contest, question or object the aberrant lending activities or foreclosure by a federal bank within the same regulatory system that the bank lends its mortgage money.

The analogy for the legal position of the borrower is like being in a duel with guns, but the borrower is not given any bullets.

And by the way, I keep reading that a bank loses money when it forecloses. I say, prove it.

Michael LittleBig, Cleveland Ohio

While I,m not sure about whether or not the government should intervene any further with respect to the morgtage crisis, I will say this: I presently struggle every month to maintain my mortgage and have done so for the past 3 years as a result of circumstances beyond my control. I have made this known to my mortgage lender (Desert Schools) on 4 different occasions within the last 2 years as it was suggested that I do; the fourth time filling out a "Workable Solutions Application" they provided in Febuary of this year. Nothing has been heard from or done by them since. This August, I went to a HUD sponsored institution in Phoenix as a last resort. Later that SAME DAY after coming home from the counseling appointment, the counselor called to tell me that he was informed that Desert Schools never received the application that I sent to them via USPS Express Mail and they (Loss Mitigation Dept) received on Friday, February 13th @ 7:30 AM. Desert Schools likely and deliberately lost or "tossed" the application. That is why if I have to "face the handwriting on the wall" so to speak namely foreclosure, I am severing ties completely with Desert Schools. There is no way I would accept an agreement with them to rent this home from them as the landlord. The disdain and contempt I have developed for Desert Schools simply would not allow me to. They would get the house back. And I would simply walk away. It's just that simple!

Isn't the renting of vacant properties to the previous "owners" (or debtors as I would call them) or to other tenants something that free markets should be able to work out? Why do we need govt intervention?

These bankers are smart guys (or at least they are paid as if they were smart guys). If they can reduce losses on foreclosures by renting them, shouldn't they be able to figure this out?

What value is the government going to add?

The Federal government can just come with a plan to get the foreclosures moving in the market – it will unfreeze the real estate market , put money in the economy – real estate commissions, registrations, property tax etc.
The Fed can just gaurantee all purchasers that it will cover any loses in the next five years – upto the median fall in house prices in that area.

i think the they should rise the limt on loans

I do not think that government mandates on this are a good idea.

Would this be coming up if the banks were truly making an effort to modify these loans based upon affordability and the current market.The borrowers played their role,but yes the lenders
hold the real control. Many times the
loan mods that are done are just to buy time for the bank and merely prolong the situation. My view is that this should be more aggressive and let the the homebuyer's financials determine if this is a long term solution. If not,work with the short sale buyers/investors to get these deals done to get the banks out of the property management business.

See,the banks thought that they would perpetually churn these homes every 3-5 years under the assumption that the values would continue to rise.
they KNEW that these owners would not be able to afford the homes after the
first few years, because those folks income would not allow them to buy the overpriced homes at a fixed rate they could qualify for(6%+).

Otherwise, why were these straight ARMs, option payment, interest only and Negative ammortization loans used so extensively? The banks underwrote the loans, decided the terms and marketed for the clients they wanted.
Do you think the banks do not have access to data to know what people actually earn in the communities where they lend? The percentages of people buying would obviously tell them that they had people in Ca buying $500,000+ homes that should be buying $250,000 homes.

They knew that they were lending on actual 60-70%
debt to income ratios? They did this and now they pussy foot around about solving problems because the government will bail them out.Stop it!

To Sidney Jimenez,CDPE Pembroke Pines FL

Hey Sidney your posting was right on target.
Your posting seems to confirm the practice of the Federal Government
that licenses and charters these banks to steal through their many aberrant
banking activities.

Michael LittleBig
Cleveland Ohio

The problem here is that the Lenders are finding ways for them to make money instead of fixing the Foreclosure mess they created by giving out loans to people who couldn't afford it. If they are willing to rent the home, or they are willing to take less than the home is worth with a Short Sale why not just redo the mortgage principal to make the mortgage payments reflect what they would pay in rent OR just sell them the home at market value and split future gains once the home is sold in the future…That's a solution. What they are proposing is a stop gap measure that will keep them collecting their :servicing" fees from the investors that own the toxic mortgage.

Glo:
>>No “do over” for the buyer. The bank should not have to take a loss because the market prices have declined.<<

If the buyer doesn’t get a do-over, why does the bank get one?

The bank *should* take a loss because market prices have declined. The bank’s role in the market is to assess the risk of market fluctuations, including price swings and loan defaults, and make decisions on whom to loan money and how much interest to charge. They *should* have seen this coming, if they were doing their job.

Anyone can hand out money, charge interest and then whine about “market conditions” when things go wrong. We don’t need banks for that.

Response to Matt –Phoenix AZ – 8-13-2009 Posting

Hey Matt,
I did appreciate your comments regarding:
We hold the mortgage Loan Borrower accountable.
Why isn’t the Bank also held accountable?
Correct me if I am wrong.

But your comment was, ( paraphrased) That person signed a bank mortgage contract to purchase or to borrower and then breached that contract is still responsible.
I am not an attorney so I have no answer ,but like you I have questions.

My question is did that person understand that contract to purchase or to borrower?
How much did that person rely on the seller or lender regarding the contents ,term and conditions of the contract they were to sign? Did their attorney review the contract?

From only my personal; experience regarding mortgage loans here is what I have learned.

The comment that I read most of the time is, “ Why would these people buy a home that they could not afford”?

The questions is, ”Why would the bank lend the buyer the money if they knew the buyer could not afford the loan”?

It is logical to believe that most Buyers place their faith and trust in the Lender Bank to confirm that the property they want to purchase is one they can afford.

The buyers rationale might be is the bank would deny the loan if the bank determined that the buyer could not afford the loan. Conversely, if the bank approved the loan, then the buyer believes that they must be able to afford to mortgage this property. Many times you will read that a foreclosure victim will say” the bank said I qualified for the mortgage loan”.

In my view the buyer looks to the banks expertise and experience in mortgage lending to make the correct lending decision. In addition, the Bank has immediate credibility because the Federal or State Government has licensed or chartered the Bank to lend mortgage money.

Here is the reality as I see it:

The borrower had no control over the loan process. From the time the borrower filled out the application until the loan was denied or approved the bank had absolute control over that loan and that decision.

The Bank controlled the loan application, appraisal, down payment funds, Bank set the terms and conditions ,verification requirements, credit bureau, employment verification, income verification, title insurance, house insurance, underwriters report and recommendation, flood survey report, Bank designed legal papers, deeds, mortgages, notes, disclosures, payment schedules, maximum loan amount, closing, lien recording and dispersal of funds.

No Buyer Has Any Control Over The Banks Loan Decision period.…… Did you?

The Bank Set The Rules For The Mortgage Game. … And you read the banking laws, rules and regulations?

The Banks Legal papers protect the Bank.… Did your attorney review your banks paper work?

The Bank’s expertise and profession was in Mortgage Lending.…… And your expertise is?

And when the Bankers said sign here by the X:

Did you read each and every word?
Did you understand each and every
word?
Or did you trust your banker to tell
you the truth and rely on what they
told you as you signed by the X ?

Yes, the Borrower has responsibility over what he has control.
The Bank has absolute control, but does not always take responsibility.

Conversely, the definition of a victim is one who trusted their banker and he betrayed them.
This is also called deceit

Even the Congress has not passed any rules, regulations or laws that affect or controls the banks in their mortgage lending activities. Do the research.

Remember that the Federal Government legally permits these banks to lend mortgage money at will, without constraint. The Banks lend their money with absolute impunity and operate autonomously. The are “No Federal Consumers Banking Regulations” (That is a quote from the Office Thrift Supervision 12-19-2006)

The better question is, “Why would you borrow mortgage money if there are no rules of law to protect your rights”?

One and half million foreclosures have been filed just this year (2009). There have been millions and millions of foreclosures filed since 2003.
They are not all subprime loans, they are not all variable rate loans, they are not all speculators or flippers. The majority are people just like you.

What I tell you, please take personally, for one day you could walk in my shoes.

Please educate yourself. Please learn the facts. The research will surprise you.
Gossip is based on biased rumor, not the facts.

Michael LittleBig
My foreclosure was 3-17-08- Case 2006 CV 584018
Cleveland Ohio

Instead of that program why not have a FEDERAL MANDATED HOME OWNERS PROTECTION ACT?

Pass a law in which ALL Mortgages (regardless of when issued) are frozen at 2% for 3 years.

Then at the end of 3 years reset the mortgages at "fair market value"

congressional bill known as the “Federal Reserve Board Abolition Act.” To wit: HR 2778, introduced by Representative Ron Paul into the House of the 108th CONGRESS, 1st Session, and dated July 17, 2003. [This is, apparently, at least the second time the bill has been introduced] That’s the good news. The bad news is that the bill, as expected, was referred again to the Committee on Financial Services (where it is undoubtedly lying dormat). (5/23/05)

I am a real estate appraiser, and I can tell you that it is an interesting concept. The only problem is that market rent would be based on published existing rental contract rent amounts. The question is, where do you get those listings? Many times appraisers use a listing service similar to what realtors use. But have you ever rented an appartment from a realtor? In my experience the rent is much higher than needed in those samples. This is because the realtors want to get more rent out of it for their clients(landlords). This is what makes listing an apartment for rent with a realtor worth it. This poses a major problem if you use these listings for appraisal, because they are higher than "market rent".

This is an acceptable idea, as long as all parties agree to accept it. The question arises, "What if the home occupant can't afford the rent."

One reason people bought homes is because the media inculcated to the public, all the advantages of ownership & mortgage payments over renting–since the 80s. And yes, "inculcate" accurately describes how much the concept was promoted.

After so much preaching a devil–Bush–rises to the Presidency and SHABAMM, foreclosures escalate!

I bet the banks love the idea of holding a property for 5-10 years and taking on the role of landlord. Silly idea.

"Why on earth would someone, who couldn’t afford the mortgage suddenly be able to afford renting the same place?"

Simple – recently purchased home mortgages are often times more expensive than what the home could be rented for. For instance, I can rent my condo for around $1400-$1600/month but my mortgage and HOA fees are a lot more. Allowing a home purchaser who can't make their mortgage payment to rent would make it more affordable for them. Especially if they got duped or were dumb enough to take an Option ARM. HOWEVER, the banks aren't going to do this. Long term loses for the bank are mitigated by foreclosure. They could take short term losses with a rent-to-own schema for those owners-now-renters but I don't see that being practical without a contingency requiring the purchase of the home within x-amount of time. It'd be great for retirees hurting under the current economy, but for everyone else – life changes.

most of the ones getting foreclosed on won't even respond when lenders try to work something out. they have no equity and walk away. they NEVER WERE ANYTHING BUT RENTERS

Why on earth would someone, who couldn't afford the mortgage suddenly be able to afford renting the same place?

To: Michael LittleBig of Ohio –

Who walked into the bank and signed a contract saying they could pay a mortgage for a home? This is a signed legal document that they are breaking. I understand that Banks had a role in this… Their role was allowing risky people to get loans. Sure, losing your job is terrible, but a responsible buyer doesn't live month to month with a mortgage. In addition, they would have 10-20% downpayment equity. *Sure, you're going to say that this would have been lost in the market – NO, the bubble wouldn't have been created if only people who could afford homes were buying them. I don't understand why everyone wants to take the responsibility off of the consumer. Banks are in "sales" too. You ever been upsold at a car lot? Is it the car lot's fault if you can't make the payment for the car YOU purchased and signed for? This is just crazy! People got caught gambling and there is a price to pay for that. Where i get upset is when I have to pay for your mistakes!!!

I don't think a "right to rent" law would be beneficial. But I have often wondered why banks and mortgage companies have not explored opportunities in leasing and managing these properties that go into foreclosure, rather than just trying to unload them in bulk. Seems to me there would be a better return on investment if they could find ways to keep the money coming in.

There's plenty of blame to go around between borrowers, lenders and government. Unfortunately, it is what it is, and digging out is painful with the pain unevenly distributed.

Do you want to avoid this in the future? Eliminate the cause of all bubbles, the Federal Reserve central bank, its money inflation, the thief it serves, government debt.

When inflationary bubbles burst, the deflation reeks havoc on fixed costs, like mortgages and debt. The borrower is caught in a vice with the only out being bankruptcy, which is equally deserved by the lenders. All of us are affected by Federal Reserve phony money. Unfortunately, the Federal government gets off virtually Scott free, just creating more debt for a future debacle.

The real culprit, assisted by the Federal Reserve, is government spending.

We hold the mortgage Loan Borrower accountable.
Why isn’t the Bank also held accountable?

Respectfully if you read all the foreclosure stories from all over this country the majority of the time it is stated it was the borrowers fault. Yes it was borrowers default-but what was the reason?
But I am here to tell you that the Mortgage lenders had a greater responsibility that played a significant role in the foreclosure process. The main element in foreclosure is control, only the bank or lender has absolute control. Remember the Banks can do anything it wants to do, foreclose, modify , short sale, loss mitigation, forbearance, and so on.
The borrower has responsibility over what he can control but no control over death, job loss.
divorce, health problems and so forth.

Thus the borrower had limited options if any and the bank numerous options.

You will always read where the borrower is the villain. That is simply not true. The bank holds all the cards.
You can prove that by the government mortgage loan modification programs that have failed.
You can prove that by the Bankers successful elimination of Bankruptcy Courts having the authority to modify a mortgage loan.
You can prove that since the banks refuse to lend the billions and billions of dollars that the Congress gave them.
You can prove that from the lack on Congressional legislation to permit the borrower to have the legal right to contest, object or question the federal bank regarding their foreclosure with in the same regulatory system that the banks lends it mortgage money.
You can prove that by the Banks Federal Regulators refusal to supervise, regulate or to enforce what few rules and regulation there are in mortgage lending. (Could this be the reason that Obama has stated he wants to do away with the Office of Thrift Supervision.?)

Michael LittleBig
Cleveland Ohio

Obama's programs in response to the housing collapse have failed miserably. Look at his economic team. Treasury Secretary Tim Geithner could not do his own taxes. Ben Bernanke is a pure academic and just another Greenspan.

Loan modifications do not work because banks have no incentive to modify loans. They would receive their "fair share" in the bailout regardless. It takes forever to complete a loan modification. This is not how you are supposed to respond to a crisis. You have to deal with it swiftly and strongly.

It appears a second wave of foreclosure tsunami is coming. If there are no real solutions moving forward, more than 50% of U.S. borrowers will be "underground" by 2011. We would become an underground nation on Obama's watch. Our Founding Fathers must be rolling in their graves.

Does it really matter? The bank is going to take my home even if I have tried to work with them.

"takings clause of the US Constitution"
This applies to individuals and the government. It has nothing to do with individuals vs individuals/corporations.

"If you think that the market can be manipulated indefinitely, I have 4 letters for you: U.S.S.R. Their economy collapsed because the state tried to control the market."

Then there is the example of China which has double-digit for almost the last decade. That country has the mix of government-controlled and led capitalism.

The problem with "Right to Rent" idea is that banks don't want to be in the rental business because that's a whole different set of costs [maintenance].

And I'm not in favor of providing additional monies to encourage banks to rent to existing residents.

The wave of foreclosure will take some homes, but the difference is: the way that is done, we have to give chances for who is facing this, with plans, modifications, whatever.

If you think that the market can be manipulated indefinitely, I have 4 letters for you: U.S.S.R. Their economy collapsed because the state tried to control the market. Our government can not fight the market forever. that means that the foreclosures will happen and (real, inflation adjusted) prices will drop. We are in for a long miserable haul that will probably outlast my as yet nonexistent children. Anyone who thinks that he or she "deserves help" is borrowing from future generations. you may as well raid your children's piggy banks. "help" is money borrowed from foreign countires. We don't need it! Where is our backbone America?

Many lenders are currently being forced to list foreclosed properties at very low prices in order to liquidate an overflowing inventory of unsold homes. Each new sale lowers the values of all homes in the neighborhood. This act attempts to allow a lender to rent the house rather than sell it in a depressed market, and thereby preserve the values of every other home in the neighborhood. This is not another government program, but rather lenders potentially preserving values, and possible keeping families in homes, rather than vacant.

Vacant and blighted homes do not support values, or preserve neighborhoods.

If in fact the new renter does not pay rent, he or she will have to leave the house and another allowed to rent the unit.

I work for a mortgage servicer and we are doing this. We started a property management company to rent some of our REOs. We are even working with schools in the Midwest, having students renovate some properties in their community to learn about construction.

This renting stuff is ridiculous. The banks will incur large costs in being a landlord. A better way to handle this situation might be to refi the mortgages using current interest rates. Do not cram down the principal on the mortgage. Whatever the balance on the mortgage, that is what will be refinanced. After all, the home buyer thought the home was worth what he paid for it. No "do over" for the buyer. The bank should not have to take a loss because the market prices have declined. In the refi process, figure out a payment that is doable, say 30% of income. Extrapolate that figure out to determine how many payments will pay off the mortgage. If the mortgage is for 60 years, so be it. The buyer gets to stay in the home of his dreams and gets the opportunity to live up to his obligation to honor his contractual obligation, the bank does not have a toxic asset sitting on its' books and does not have to be a landlord. If the home buyer finds he can pay more on his mortgage as the economy recovers, he can pay down the mortgage faster and retire his debt earlier. And, as the economy recovers, the value of the home will eventually return to the bubble level. No one loses.

There has to be good reasons which forced the owners into foreclosure.Will those same reasons be relevant if reverted to renting same premises?
Most will want to start-over elsewhere even though renting is only option.
It's difficult enough being "owned" by the bank whilst paying a mortgage off.Being subservient to that same lender in tenancy would leave an unpleasant taste in most peoples' mouths.The rent charged would need to be below market trends for this suggestion to be feasible.

I love it when people think they have something in common with banks and tell others to "deal with it" or "live within their means". Yes, because we all love the banks – at least we all love the banks when they are taking someone else's home, not ours. What a ridiculous culture we live in. Wake up. Reagan is dead.

I wasn't aware that the takings clause of the US Constitution had been suspended, so that people who were extremely poor credit risks (ie not making or able to make contractual mortgage payments) were to be rewarded for their actions by allowing them to retain full access to property they had been removed from. Could you please post a copy of the amendment.

Sorry it's not a car, you can't lease with the option to buy. If this was the case wouldn't every single person be renting to own rather than paying off a strangers asset??? This is just pure stupidity.

I have a simple question for the homeowners who aren't willing to take any responsibility for the current situation in the housing market.

Don't you believe, that when making the most important financial decision (for most of us) in your life, that you should do your due diligence and research your options? I wonder how anyone can see 8-10% a year appreciation and only a 1-2% a year increase in the average Americans income and not see some sort of problem coming. Many of the hardest hit areas saw 50%+ appreciation. How can you think that is sustainable?

Ultimately, I feel that everyone has a hand in creating the mess that we all created. Homeowners living outside of their means, intentionally or not, banks losing site of risk based decision making, and the government for promoting a long drown out recession by poorly timing, targeting, and executing their reactions.

My hindsight is 20/20 comment is;

The government and the fed should have taken the TARP money plus the amount they have gauranteed of Citi's mortgage backed debt (Total approximately 1 Trillion) and just flat out said the government will gaurantee all mortgage backed debt by FNMA and FHLMC. I am not saying this would prevent foreclosures, it wouldn't, and it wouldn't be enought to cover even 1/5th the debt those two entities back, but it might have created some liquidity in the secondary market that might have prevented the massive sell off of financial stocks that had caused the fear that started the whole meltdown process.

Those proposing banks should become landlords by renting their properties/assets to struggling homeowners have no idea what it takes to manage and maintain rental properties. What if homeowners-turned-renters refuse to pay rent? If that's the case it would take on average 3-6 months to evict tenants for non-payments.

The solutions and programs proposed and implemented by the Obama administration in response to the housing crisis have largely benefited the crooks on Wall Street while failing to address the challenges facing Main Street folks like you and me.

Here is my proposal:

The government would subsidize part of the mortgage payments by reducing interest rates between 1-2 percentage points on all mortgages – owner occupied and non-owner occupied – taken out during the top of the housing boom for 3-4 years. We can limit the period from 2004-2006 or 2005-2007. The mortgage contracts would still be in full force and effect, except that the interest rate is reduced for a certain percentage points for 3-4 years.

The idea is to give everyone purchasing a house and taking a mortgage in that period "a shot in the arm" by effectively reducing their monthly payments to give them time to ride out the market.

For those who still can't afford their mortgage payments, even after factoring in the interest subsidy, they should lose their homes to foreclosure. So let the forces of the free market "recycle" these foreclosed assets.

For those who are responsible in making their payments or on the verge of defaulting on their mortgages, the reduction in payment would allow them to have extra income to spend that they would not otherwise. This would help the economy as well, as consumer spending accounts for 70% of the U.S. economy.

This program would reduce the number of foreclosures while helping to stop the bleeding for banks due to their exposure to credit default swaps. The value of all CDSs are estimated to be between 50-55 trillion dollars. Banks would have an incentive to participate in this program because they still receive interest payments under this program while reducing the risk of foreclosure on their properties/assets.

To keep costs under control the government could negotiate with participating banks to pay 75% of the reduced interest. Taxpayers money would be better spent than just giving it to the crooks on Wall Street.

Response to Alex .Langhorne Pa
Michael LittleBig – I see you’ve been posting your proposal to forums around the internet, and I am certainly impressed by your command of legalese, but it seems to lack any specifics as to why you were foreclosed upon or exactly how the Office of Thrift Supervision was delinquent in their duty. Were you current on your payments? I’m guessing not if you were foreclosed on, but would be interested if this is not the case.
=====================================================================
The answer to your question is lengthy. For example, I filed my 172 page documented story regarding my foreclosure with the Congressional Oversight Panel April 2009.
Simply put it started when the bank refused to refinance my mortgage loan in 2003 for balance only with no new cash out to reduce my monthly payments. My payments were current.

Their decision was based on Am Trust Banks 2003 appraisal performed by their employee who was a state licensed (1991) which was flawed resulting in a distorted market value. In 2007 the State of Ohio agreed the appraisal was flawed.
This appraisal then would be the catalyst for my foreclosure.

Secondly in 2003 the Bank extinguished my rights to refinance since I qualified under the federal regulation regarding refinancing for the balance only without the requirement of a new appraisal.

In my defense I alleged that the bank violated numerous laws, rules and regulations regarding my mortgage loan that greatly contributed to my foreclosure.

Then the bank took the foreclosure to a person level. You should note that on July 6 2007 the bank through their attorney in writing threatened me and promised me that they would come after me for filing a frivolous lawsuit in fighting my foreclosure if the case was ever dismissed.

In my defense I alleged that the bank violated numerous laws, rules and regulations regarding my mortgage loan that greatly contributed to my foreclosure.

Here are the violations that the Office of Thrift Supervision refused to supervise, regulate or enforce under my OTS Case # 010758 2006,

Violations Summary:
1. 05-23-2002: 2nd Mortgage HELOC increase
Title 12 CFR 560.101. Real Estate Lending Standards – includes appendix

2. 03-2003 and 05-2005: Loan Purpose
Title 12 CFR Part 203. Home Mortgage Disclosure Act
Title 12 CFR Part 564.3 (7) (ii) Appraisals
Ohio Savings Bank’s Board of Directors Approved Appraisal Policy, Section IV (B)

3. 03-2003 and 05-2005: Mortgage Appraisals Required
Title 12 CFR 564. Appraisals
Ohio Savings Bank’s Board of Directors Approved Appraisal Policy, Section IV (B)
Office of Thrift Supervision Bulletin TB55a

4. 03-2003: Loan Refinance Denial based on Loan-to-Value Ratio
Title 12 CFR 560.101. Real Estate Lending Standards Appendix
Ohio Savings Bank’s Board of Directors Approved Appraisal Policy, Section IV (B)

5. 03-2003: Mortgage Denial based on Flawed Appraisal
Ohio Savings Bank’s Board of Directors Approved Appraisal Policy, Section V &VI
Title 12 CFR 564-Appraisals – 564.4/.5/.6/ .8
Office of Thrift Supervision Bulletin TB55a
American Standards Board, Uniform Standards of Professional Appraisal Practice
State of Ohio Division of Real Estate Citations and Violations (Schedule A)

6. 03-2003: Loan Credit Denial Notification
Ohio Savings Bank’s Board of Directors Approved Appraisal Policy, Section IV (B)
Equal Credit Opportunity Act, Title 12 CFR 202.9.

7. 2003: Homeowners Insurance – Ethics and Competency
Title 12 CFR 570. Safety and Soundness Guidelines

8. 05-2005: Mortgage Loan Denial based on Cancelled Appraisal
Title 12 CFR 564. Appraisals
Ohio Savings Bank’s Board of Directors Approved Appraisal Policy, Section IV (B)

9. 05-2005: Appraisal Fee Required for a Cancelled Appraisal
Equal Credit Opportunity Act, Title 12 CFR 202.14.

10. 2005 and 2006: Consumer Reporting Act (Fair Credit Reporting Act)
Title 15 USC 1681b, Chapter 41
Title 15 USC 1681p, Chapter 41, subchapter III
Title 15 USC 1681n, Chapter 41, subchapter III

The Office of Thrift Supervision stated in writing to me on 12-19-2006 that they would not help me since “There are No Consumer Federal Regulations”

In May 2009 I requested that The Office of Thrift Supervision under the Freedom of Information Act supply me with copies of their examinations of the aforementioned violations. The OTS has never answered me.

I was forced into Bankruptcy by the Banks 2003 appraisal. The only real protection that a foreclosure victim has is bankruptcy.

I did countersue the Am Trust Bank foreclosure in Cleveland Ohio but ran out of money. They sold my house on March 17,2008. The Government in essence who Licensed the Am Trust Bank approved this foreclosure by not enforcing the rules, laws and regulations. In essence then the federal government licensed this federally chartered bank to steal.

I lost everything I worked for as a result of this unethical bank with a complicit federal regulator and oversight by a complicit Congress that since 1980 refused to legislate a level playing field for the mortgage borrower.

Michael Littlebig
POB 16588
Rocky River OH 44116

THE WAY I SEES IT:
Congress got us started in this mess a long time ago and the last thing Americans need to do is let them (or any part of the Administration)try to get us out. We have (and have had for years)laws and processes for those that INITIALLY "OVERSPENT." I'd support only those who find themselves losing their home because they lost their job. I'll bet that a small percentage of foreclosure activity.

WHY would an investor go into a leveraged position to rent to someone who doesnt pay their mortgage?

Banks cannot manage a rental business. TOO FUNNY.

There’s only one thing that will solve the housing crisis: lower prices. Any program that delays falling prices is not solving anything; it is actually delaying the solution. There should be more foreclosures, not fewer, and they should be happening faster, not slower.

This is exactly what happened in Canada during the "Great Depression" of the 30's.

One example that I'm familiar with was a person who bought their home in 1929 just before the depression occurred. He was able to pay his mortgage throughout the depression with great sacfifice. Most of his neighbours became renters of their homes because they couldn't pay the mortgage. The average rent was much lower than the mortgage payment. This meant that there was no great dislocation for them and they were able to live in the same neighbour hoods. The banks received an income on their assett which rmained on their books.
The interesting thing was this. After the depression was over the banks sold the homes back to their original owners.
Now back to the original folks. They struggled to pay the mortgage and finally got the home paid for by 1948. The folks who had rented their homes and then repurchased them got theirs paid for by the mid fifties.

It was a classic win win.

Dear BN, San Clemente, CA: August 10, 2009 6:39 pm,

You were stupid because you bought a home that was really only worth 230k for 400k.

You were stupid because you didn't (refused to) acknowledge that housing prices going up 10, 20, 30% a year was not real.

You were stupid because you didn't think there was any need to set up your life to survive a temporary loss of income.

You were stupid because you got an interest only loan at the top of a housing bubble on a house that you only put 5% down on and didn't notice your job was insecure.

Basically, you were stupid because you bought too much over priced house. Like it or not, you DID NOT live within your means.

Losing that house is YOUR fault. Deal with it.

Since modifications are going at a snails pace, let them rent at 70-80% of a mortgage payment until the loan can be modified. This might help people stay in their homes.

If you can't afford your home, for whatever reason, you should be forced to move out. If not, the "help" the government is handing out should be given across the board, not just to those who are late on their payments. If you don't have a job, move in with friends or family. I know it's demoralizing, but it's life. You got a bad hand… you can't just hand your cards back to the government and ask for a re-deal unless everyone at the table gets new cards too.

It's just more kicking of the can down the road. Eventually these houses have to go back on the market. In many cases the borrowers already vacated long ago; they had to move and couldn't sell so they let it go to foreclosure. Or they were only speculating in the first place.

By the time foreclosure actually finalizes, they've lived rent-free for a year or more, or in many cases they've skimmed rent from their own tenants while not paying the mortgage. These are not guileless little lambs.

Anyhow, I just read a report that determined that BORROWERS extracted about double the wealth that BANKS did by borrowing against phantom "equity." It is the banks who are in worse shape; they are losing billions.

Borrowers, lest we forget, used their home as an ATM to buy all those things that there is no longer a market for: cars, plastic surgery, vacations, granite & stainless kitchens.

There is no good reason to be rewarding them by forgiving their debt, forgiving the taxes on their forgiven debt, letting them live rent-free, then bending over backward to keep them in the house.

Keeping houses off the market to keep property values from falling is unfair to the prudent people who only will buy what they can afford. Government should not be aiding in the manipulation of the market.

"The reason we’re here in the first place is because of loose regulation or government intervention which allowed people into homes they couldn’t afford. "

I propose that the reason we are here is because…
1. greedy financiers cooked up undefinable "derivatives" while they…
2. lobbied your congressmen for deregulation so that…
3. They could line there pockets by giving loans to people that no other sane person would have ever qualified, and then…
4. Cashed out, packaged, and punted the risk to other institutions who can't even look their shareholders straight in the eye and explain what they had all just purchased.

How many credit card offers have you received in the last month?
Is there anyone outside of Bill Gates or Warren Buffet who you would extend that much credit towards?

Why not just redo the loans to the current % rate? My wife who I recently wedded got suckered into a condo for 6.5% interest only 176k loan for 1190 a month. If they would refinance us on that same interest only for the current 5.3% fixed we would save over $300 a month that would be spent back into the economy. Instead they say the condo is now only worth 156K and they won't refi. Seems to me if they did at 176 they would still be making money on the loan we would be saving money and spending it on other things back into the economy. Instead we are spending less eating in more and not doing anything on the weekends. I've already laid down the plan that if one of use loses our job the we are walking away from the condo and keeping my house which is only $850 a month mortgage. Their's your win win Uncle Obama. I'm not investing anymore than I have to in America until YOU learn to live within your budget like you expect us to.

The idea of foreclosed homes being rented to the ex owners is more than stupid. These guys would live for free and would pay no rent. Why should they. They have lost their equity and their credit. What more can they lose.
Only thng that would work would be accross the board low interest rates of 1 % and refi of the entire mortgage balance, no matter what the present price or appraisal is for a 30 year loan. The people would stay in their homes, and pay the mortgage. Those who really cannot afford this would leave unfortunately and new investors or home owners would jump in, and home prices would start going up slowly, with decrease in supply and increase in demand. i know a number of landlords who are not getting rent from tenants, so if banks or Govt decide to become landlords, it would simply be free housing. BTW I think I will be more comfortable if I join the unemployed and go on govt payroll, it is more lucrative than working- food stamps, unemployment, govt subsidized loan adjustment (lot better than my mortgage payment on my under water mortgage which adjusts next month by $1500 a month), free rent, free health care etc etc.

Clearly,no one benefits from a home
forclosure.Though I like the idea of a
right to rent,I also would like to see
specific rewards or punishments for all
parties involved,based upon whether the
program is adhered to,or misused.I would definitely have clauses incorporated into this type of deal.

OK, Here is another "great" idea…what are they CRAZY? How will renting help the situation? The issue we have is homeowners that bought houses beyond their means, took 100% financing, have no valuable equity at the home and now that values have depreciated they are handing the "keys" back to the bank with their losses….

We now do "short sales" and allow these homeowners to be "forgiven" for the loss and depreciation in the value of their homes…..we now thinking of allowing them to rent their home back at a "lower" price than their mortgage once their home is being foreclosed….

How these kind of "gifts" will stop the process? The neighbor and the whole street will do the same…..why wouldn't they? Their home value was depreciated as well….

Instead I suggest to do the opposite…..be tough on those people, they cannot pay for their homes and debts today? No problem, one day they will be able to…..than we should take their "future" income to pay back for the loss the banks incurred because of their "in ability" to meet their debts……

How about just kicking people out of homes they can't afford and letting the free market that made this country #1 take care of the mess. Stop propping up banks that are built on a foundation of bad loans.

Low interest rates (subsidized by taxes) and 40 year amortizations (indentured servitude to the lender) are ideas that only prolong the misery and spread the pain to those who are not even affected.

The period from 1997 to 2007 was a repeat of what happenend in the financial markets from 1919 to 1929. The idea that value comes from perception is always a slippery slope. I believe that Mr. Dean's idea of letting families stay in their home has great societal and pycholigical benefits. I see this idea as the only logical one in a sea of ideas to "fix" the housing problem. There has already been enough pain imposed on the American people. Let's just admit that "we", all of us, are responsible for feeding the housing frenzy. It was nice while it lasted. The only "fix", if there is one, is to mitigate the pain imposed on families whose lives are disrupted by falling prices and bad loans. Let's just give them a bit of dignity and let them rent back the house they call Home.

I read about a similar program called SwapRent at Tom Lindmark's ButThenWhat blog. Here is the link http://www.butthenwhat.com/?p=5920 .

I made the following comment there. If a homeowner can use SwapRent to become a renter of his home to avoid foreclosure and still get to own the home why would he wait until after foreclosure and lose his home to become a renter under Dean Baker's own-to-rent proposal? As a rescue solution for distressed homeowners it appears that SwapRent is like sending a sick person to hospital whereas the own-to-rent scheme seems to be more like sending a dead body to hospital.

SoCal Econ Girl

Houses are being foreclosed because owners can't make payments for many reasons. People buying overpriced houses in 2005-2007 at or beyond the limits of their incomes and financing them with exotic financing is half the problem.

A significant problem is people loosing their jobs or being paid less for the same job that they used to do.
People's salaries have not gone up at the same rate that housing has gone up in the the last ten years and now that needs to come into equilibrium again. They cannot afford the payment that they used to and it's easier for banks to just foreclose rather than work something out.

Afterall banks just make money by moving it around and are not in the landlord business.

FORECLOSURE LOTTERY: why not? One person wins the home for free, the lottery funds pay off the mtg. This would quickly clean up the excess foreclosures and allow the equity in my own home to settle out again.

This sounds like Pottersville (remember from the movie Its A Wonderfull Life). Tell Mr Potter that we will have no part of this nonsense. The whole purpose of the Home Affordable plan was to make the mortgage payment affordable for the current homeowner by modifying the mortgage. The rent plan is a great way to get the banks off the hook from doing what they are suppose to be doing, modifying loans! There are lots of decent people out there that cannot get a modification done that are hard working Americans. Some are Americans that had their job, which was outsourced to another country. I am a loan officer. I talk to these people every day. Do you know what its like to train someone from another country on how to replace you!!! I'm tired of people commenting on articles like these that the people out there are nothing but a bunch of dead beats that bought houses they could not afford. As usual the government rolls out a program and than puts no mandates or quota's in place to make sure the job is geting done. We just get more horrific statistics like 1.5 million people lost their homes in the 1st half of the year! Turn them into renters. How humiliating. This administration is no less a joke than the previous one.

There debate presented within does not offer any real solutions to all homeowners with mortgages that are upside down or soon to be since we are still seeing sections of the country that have values dropping – like the greater Phoenix area. I am not an economist, nor am I in the industries that allowed this problem to occur. I am a home owner that is now in my third home at the age of 45, from middle class America, that was raised in an environment that taught me to live within my means. Each home I owned was something I could afford without putting my long-term financial situation in jeopardy. But know I am upside down in my mortgage due to the greed of others and inflated property values. So where is my help???

I still pay my mortgage, property taxes, and property insurance (still waiting for the call from my insurance agent to adjust my premiums based on current market value…) but I have lost significant equity that I may never recover. I am placed in a situation that does not me to even consider moving unless I am willing to take a huge financial hit (and I am not willing to walk away from the property and let another property foreclose). So where is my help???

If banks and mortgage companies are going to take their astronomical write-offs and receive government assistance, how about helping the average Joe?

What if banks and mortgage companies renegotiate all primary residence mortgages based on current market values with an additional stipulation in the contracts that will compensate the lenders based on future market sales? The contract would record that current mortgage adjustment and this would serve as teh basis for their future sales recovery. The homeowner wins by having a current market value adjusted mortage, and the lenders win by having fewer foreclosures. I think the program would need to use prudent financial and income verification to ensure the homeowner can still avoid the adjusted mortgage payments but I think this is the real win-win.

Certainly, this proposal deserved full financial review but for me, the common Joe, this is how I can be helped in this time of crisis.

To support the comments by “real estate agent, salinas, ca: August 10, 2009 3:45 pm”

Enforcing the “classic” foreclosures is fuelling the next housing bubble – dropping of house prices so low that, as some very serious world class financial institutions predict, as much as up to 50% of home owners may choose to default their loans when they loose any hope to ever break even. And what will you do with some 150 millions (potentially homeless) people? Throw them out on the streets? If so then don’t be surprised if the events of year 1917 in Russia will happen here in the US in 2012. And this would set the mark for the end of the “free market” and the “democracy” – this time however, for ever.
Another way to get out of this mess would be hyperinflation – if the dollar looses 200 – 300% of its value then paying off fixed rate loans would be no problem but what about the rest of the economy? Either way, a loose-loose situation for everybody – the lenders in the first place.
The Right-to-Rent program is a very good idea and most probably the only realistic solution to stop this scenario. Foreclosure proceedings MUST stop right now when it is not too late.
The government impelled regulations are necessary. We cannot count on the free market to fix it because by definition the free market works by destabilizing the status quo and its time frame to predict the future is no more then a day. Every day experience on world’s stock exchange floors and so many free market induced bubbles in the past are the prove of that. Short-sightedness of the free market is especially visible when it comes to “stop-loss” sales which fuel foreclosure sell-outs – save the day, f…the future.

There's no way they will do this. It makes too much sense.

People voting for this measure have missed the point. If the owners aren't making mortgage payments, they won't make rent payments. Without jobs, they don't have money to make ANY payments.

Michael LittleBig – I see you've been posting your proposal to forums around the internet, and I am certainly impressed by your command of legalese, but it seems to lack any specifics as to why you were foreclosed upon or exactly how the Office of Thrift Supervision was delinquent in their duty. Were you current on your payments? I'm guessing not if you were foreclosed on, but would be interested if this is not the case. Also, since most of these loans did not become a problem for several years after they were issued, generally when they had already been securitized and were no longer held by the original lender, it seems like your proposed system would be unlikely to draw any complaints until after it was already too late. I think this problem could be solved if Fannie and Freddy were more diligent and selective of the mortgages they buy, or if the originator was required to buy back and hold 20% of the mortgage backed securities, meaning they would have some skin in the game if things went south on the loans, probably more incentive to exercise good judgement in who they offer loans and for how much.

If only it were that simple. A lot of people being hurt could afford their homes. Before.

Case in Point:

I bought a home for $400,000 and put 5% down. It was an interest only loan and my credit score was 740.

Unfortunately, I was laid off and immediately reached out to the bank for assistance. After 5-6 months of dealing with the bank, I was denied because I fell outside of the investor (Fannie Mae) guidelines for a loan modification.

My home is now worth approximately $230,000. Can someone please explain to me how I was irresponsible? Can someone please explain to me what I did wrong? How is helping me rewarding stupidity?

This is pathetic. Let the market dictate where prices should wind up. Banks artificially increased prices by lending too much to people who clearly couldnt afford it. Why? because the government wanted that way. Why? Because that is what government perceived people wanted. Lets just convert to socialism and get it over with.

Absolutely NOT. If someone cannot afford where they live, they need to get out. Bill Clinton is the reason the housing market is where it is today. He cheapened home ownership by selling the idea that 'everyone deserves to own their home' and then eliminated the financial requirements like 33% payment to income ratios and 20 percent down. Home ownership was the American Dream because people used to actually dream of it. They used to have to work and save money for a down payment so when they finally bought a house, it had value and they would fight to keep it. Now that anyone can buy a house, even with no money down, people have no incentive to do that. If they run into financial trouble, they just walk away. After all, it wasnt their money, it was the banks.

Go back to the requirements banks had before the Clinton era.

Count me as one of those that the "Obama Plan" isn't helping. My lender notified me that I didn't qualify after making 3 special payments and now I'm back in foreclosure. Lost my job, losing my house and my lose my marriage as well. Got to love free enterprise. Unfortunately, there are those that have not been laid off (I was 10yrs ago – telecom and I found a job 3 years ago only to discover the owner was a tax fraud and is now in prison.) Not all of us that have been laid off or find themselves in foreclosure deserve to be here. I won't rent my house from my lender even if given the option. I've lost every penny in the transaction and don't want to throw more money down the drain with them.

And let me assure EVERYONE, there are people not making their payments even when they can afford them. It's a business decision. When your home is valued at 350k and you owe 700 (very popular scenario in Southern CA, Scottsdale and Florida) you can not pay for basically 1 year and live rent free, then foreclose or bank short sell, and rent an equivelent size home for 2K a month. There are TONS of people taking advantage of this situation. And sure, your credit is shot for a few years, but you saved hundreds of thousands of dollars people… and us responsible folks are paying the bill for these houses and the bonuses for the banks

Right to Rent will just convince more people to stop paying on their mortgages to get a reduced monthly payment for housing. They don't care if they're stripped of their equity. Most of them only put down between 0% and 5% anyway.

My advice:
Get yourself up to your eyeballs in debt. Convert all US$ denominated assets into Chinese$ denominated assets. When this system crashes and the US$ becomes worthless you'll be able to pay off your debts for pennies on the dollar. Also consider dual citizenship in a country with a very low tax rate. When the "G" takes over your health care, you'll get comparable benefits in a foreign country without the high taxes. BTW-this response will probably be sent to the White House "trouble" list.

HERE IS A LITTLE HISTORY on MY GMAC refinancing:
AttorneyGeneral'sOffice
P.OBox629
Raleigh,NC27602
Ph: (919) 716-6400

GMAC Mortgage Corporation
100 Witmer Rd.
Horsham, PA 19044
USA

barry.bier@gmacmortgagecorp.com

Dear Mr. Bier,

In trying to refinance my GMAC Mortgage in North Carolina to a lower interest rate the following concerns arose:

Subject to the provisions of G.S. 53 243.03, the Commissioner may, by order, prohibit licensees under this Article from engaging in acts and practices in connection with mortgage loans that the Commissioner finds to be unfair, deceptive, designed to evade the laws of this State, or that are not in the best interest of the borrowing public."

I know GMAC is currently condoning practices that are not in the interest of the borrowing public. They are providing misleading information to borrowers looking to resolve mortgage refinance/contract issues that causes unnecessary credit destruction.

I believe per the General Statutes chapter 14 118.12. Residential mortgage fraud is being carried out & applies to GMAC loan services division

(a) A person is guilty of residential mortgage fraud when, for financial gain and with the intent to defraud, that person does any of the following:
(1) Knowingly makes or attempts to make any material misstatement, misrepresentation, or omission within the mortgage lending process with the intention that a mortgage lender, mortgage broker, borrower, or any other person or entity that is involved in the mortgage lending process relies on it.
(2) Knowingly uses or facilitates or attempts to use or facilitate the use of any misstatement, misrepresentation, or omission within the mortgage lending process with the intention that a mortgage lender, borrower, or any other person or entity that is involved in the mortgage lending process relies on it.

Their loan modification department is currently misleading clients to STOP MAKING PAYMENTS in order to QUALIFY for assistance programs .
When full payment is made they do not reinstate delinquent loan notifications to credit agencies by retracting negative reporting that was a direct result of their program criteria.

They are in violation of N.C. GENERAL STATUTES – Chapter 53 Article 19A # 53-243.11 Prohibited Activities # (1) by misrepresenting requirements and influencing decisions associated with loan modification practices.

This all started with a request to refinance the existing loan to a lower rate in October.
GMAC customer service referred to refi department. Refinance department advised the only option was a loan modification since it would not appraise higher than the loan amount.
Loan modifications advised to get into the loan modification program you have to be in arrears for them to help. This was not true per the loss mitigation department discussions after complying with their criteria to be in arrears.

I believe this practice of deception may somehow be tied into a bigger picture to get funding from the federal government by showing a larger than required increase of delinquent mortgages.

Even though I have been current, GMAC continues to post false negative statements against my credit rating, latest being 2-28-09.

Any help you can provide to fix my credit report back to the high excellent rating it was and aid in lowering my existing interest rate to the current market rate would be much appreciated.

Thank you,
William Leigh
GMAC loan # for
2000 New River Inlet Rd.
North Topsail Beach, NC 28460-9500

Oh, I didn't tell you the financial numbers I provided had to be changed at GMAC's coaching to BETTER my chances to get the loan modification. I should show a positive cash flow by a couple hundred dollars, no more than 5%, that would better my loan mod approval chances. All said and done the loan mod after the submittal was for the amount in arrears for $4300 at a lower interest rate. Needless to say I was slightly pissed.

Called today 7-21-09 to refinance and because I had been late (following their guidance) within the last 12 months they can't refinance.
Be aware if you short sale YOU HAVE TO THE PAY TAX ON THE DIFFERENCE between what you owe and what it sold for.
I personally think I'm going to let it get foreclosed and at the hearing ask them to produce the ORIGINAL contract with my signature. They are SO screwed up I doubt they can produce it. If they can't they can't foreclose. Let you know in several months to a year.

One other thought, this whole mess in the economy probably could have been stayed since the government owns Fannie Mae and Freddie Mac why didn't they set ALL existing mortages at say 4% instead of all the TARP and bailout money to the corporations? We who are funding this with our tax dollars would have benfited and the economy would have kept on cranking out. Think about it, if your interest rate for your mortgage(s) was 4% how much extra cash would you have been able to put into the economy? There would be a lot less unemployed and it would have been an IMMEDIATE stimulus. TOO SIMPLE I GUESS!

How about just lowering the financing rate to 4.0% or 4.5%. Lending for 40 years. Just rewrite the loans to lower the payments to make it easier for people to afford. The government tried to lower the fed lending, but somehow it keeps going up. Homes were selling at 4.5 and 4.8 back in April and early May. Now that rates are inching up, sales have slowed. Lenders have to stop trying to get rich quick off of home loans.

The reason we're here in the first place is because of loose regulation or government intervention which allowed people into homes they couldn't afford. America doesn't need another thinly disguised welfare program for housing.

I think that the people having trouble making payments are in over their head, this is not simply a problem for people who lost their jobs. With the exception of the unfortunate people who lost their jobs, we now have people living in homes they can't afford. While it may seem like a travisty to force them to move out of their house, let me remind you that they can't afford it in the first place and few are even making payments. If you buy something you can't afford, you return it. If you can't afford the house you are in, you should get out and find one you can afford. I think these billions of dollars our government is spending should be used to purchase government housing developments from builders with unsold property for people to rent. Many people have walked away from their homes for business reasons but cannot find a place to rent due to the damage they have done to their credit. There are many families that can afford $1500 a month in rent, but not the $3500 a month loan they got. If you cannot afford the home you are in, you should be forced to move out. It sounds mean, but it's life people. You cannot discriminate against the responsible home buyers. A discounted mortgage should be done across the board. Otherwise, keep a very detailed list IRS, because I want my tax dollars refunded when these houses come back up to value in 10 years and the people who got adjusted loans are spending the free handout I'm currently paying for. You cannot reward stupidity. Our government is rewarding the the two causes of this meltdown, greedy banks and stupid buyers. Where's my handout??? Where's my reward for saving my money and getting a house I can afford? My equity is lost from fire sales and my taxes are going to the people who caused it. Thanks government…

I just cannot believe that in America people are talking about confiscating private property and creating what is in effect "people housing". This is pretty much the end of freedom.

This would work out very well. Most people who are against this keep arguing that someone who cant pay the mortgage couldn't afford to pay the rent. Well, the people hit hardest by this downturn are the people who bought at the hyper-inflated prices of 2005-2007. So, someone who bought at $200,000 might end up with a mortgage payment of $1,750-$2,000 they cant afford but the fair market rent of that house now might be $1,000-1,200. It is very reasonable that the former owner could be in a position to afford the rent but not the mortgage.

This would help stop the downward pressure all the foreclosure sales are putting on house prices and allow those hit by this recession to preserve some dignity and so many families would not have to be uprooted.

WOW! Now there's a simple idea from Kay in San Jose. Probably one that actually works. No wonder the government in Washington hasn't thought of it!

I guess I'll buy a million dollar house I can't afford, with no money down and no prove of income. Not make a single payment to the bank that will take a year to foreclose (one year of free rent) then I can stay renting the property for "market rent" (probably about one thousand dollars, if government sponsored) Now I can afford that boat I always wanted…there might be a bail out for that in the future…BTW I'm applying for food stamps next month.

"Why not just have lenders suspend payments for 9 mos to 1 year..That is what I call a WIN WIN."

Kay, how is interfering in the market by munipulating supply and thus limiting the options for more deserving, younger individuals that are trying to buy their first homes in the bay area without repeating the mistakes of the past 10 years create a WIN WIN scenario? How does this help real estate correct to a level where the average american can actual save an reinvest in the economy instead of pouring ever $ they have into a mediocre shelter? How about instead of living beyond their means they can swap with me, move into my apartment so I can then buy their house at market rate.

Banks are not under any legal obligation to modify their mortgage loans. Banks are not afraid of reprisal from the borrower since they have no rights. The Banks do not have to answer to Congress and they operate with absolute impunity.

The banks control every facet of the mortgage loan process from application to loan approval or denial.
Here is a fair and equitable solution to prevent a majority of residential foreclosures.

I lost my home of seven years in foreclosure because the Office of Thrift Supervision did not carry out it responsibilities as a federal regulator of federally chartered savings banks. The Office of Thrift Supervision committed malfeasance in their lack of supervision, regulation and enforcement of violations of laws, rules and regulations committed by my federal mortgage lender.

Based on my experience in losing our home of seven years and experiencing in the last three years the legal and regulatory institutional disregard for the federal mortgage loan borrower, Here is a very simple solution. It is readily apparent that the average homeowner cannot afford an attorney with a real estate background, the banking knowledge and federal regulatory experience to protect their rights and give them a voice in confronting and negotiating with their federal mortgage holder to prevent their residential property foreclosure.

I have based my solution on what the Office of Thrift Supervision stated in writing (December 21, 2006, in response my complaints against AmTrust Bank, Cleveland Ohio), “There are no applicable federal consumer banking laws and regulations”. From my viewpoint that is translated that the borrower who has been harmed by a federal thrift bank has no rights and no voice to contest, object or legally question the issues of the lender bank within the same regulatory system in which this bank lends mortgage money.
The Congress by legislative design has made certain the borrower has no rights.

The answer to foreclosure actually is very straight forward – include the federal mortgage borrower in the process. Let the borrower become an equal legal participant in the solution of a problem through neutral arbitration with their federally chartered bank who legally owns and holds their mortgage.

The Solution is like the Smoke Detector in a house. When there is a fire the smoke detector goes off. My smoke detector is the borrower. By allowing the borrower to file a complaint to a third party within the regulatory system that has authority to arbitrate, it alerts the regulator who supervises the bank that there is a consumer or operating problem. From there the regulator can determine what kind of red flag has been raised, how serious the problem is, and if it requires more attention.

To create a transparent federal mortgage loan transaction and fair equity, and to insure ethical conduct of the parties throughout the life of a mortgage loan, give equal rights to the parties of equal weight by engaging a neutral designated arbitrator to help problem solve a fair and equitable solution to the issues raised by either party. It levels the playing field, so to speak.
Establish rights for a mortgage borrower to question, object or contest what they consider unethical lending behavior on the part of the federally chartered savings bank within the same regulatory system in which the bank lends mortgage money. This would result in productive and effective solutions to problems that normally would turn into a lawsuit or foreclosure.
Congress through legislation has to give the mortgage borrower a legal forum to be heard.

Based on the fact of millions and millions of foreclosures were the mortgage borrower has no rights and no voice added to the fact the federal regulators were negligent in performing their responsibilities with a Congress that was complicit would suggest that loan modifications are only treating the symptoms.

Foreclosure Case 2006 CV 584018-Cleveland Ohio Common Pleas Court

Michael LittleBig

OK, here we go, again. If we had let this take it's course we would not be here. We keep dealying and waiting and holding. Whcih costs more money. And yes I work in the industry. If you allow people to rent their own home on a foreclosure, what is to stop someone that is underwater from doing this? I would much rather rent then own, especially with the market and the circumstance we are in. You will turn Freddie, Fannie and all out funds into HUD Section 8…

Why not just let them live for free and the government could buy the houses from the banks! That way everybody wins. Even China that buys US bonds and will finance the buying of the houses.
Can't see how that is a lose lose case.
While if you let the free market set the prices, the shadow market will kill current home prices and the banks that the taxpayer has invested in would take a bath. Yep, we should buy all those house now!

what I don't understand is, why isn't it in the bank's best interest to rent to these people anyway? I understand they are not in the rental business, but it beats driving the price down and losing money.

Of course, the renters might not pay their rent. In fact, in my neighborhood, many of the renters don't pay. Then they punch holes in the walls when they finally get evicted.

"Market rent" would typically mean enough to cover what debt service would have been, property taxes and insurance maintained by the landlord. If property values go down substantially, and an estimated debt service on an imaginary 80/20 LTV loan was the starting point for calculating the rent, perhaps the homeowner would be paying less in rent that the true ownership cost pre-foreclosure. Otherwise, "market rent" could be painfully close to what pre-foreclosure costs were, and that isn't likley to benefit the now-renter at all.

the mortgage refinance is not working do to the fact that banks would rather foreclose and clean up their books, also many families have lost one or both incomes due to layoffs and can not refinance as it took both incomes to qualify. we now have people layed off from their jobs who have lived in their homes for 10 to 15 years and paid their bills and mortgages on time. I don't think these people want to rent back their homes.

This is a terrible idea. Banks are completely unprepared to be landlords and as one poster put it I am not even sure they can legally do it. Besides banks are in the business to lend money (these are their assets) not own real estate. A much simpler and practically solution is to lower the interest rate on the borrowers current mortgage to a rate that would equal market rent. The bank may have to lower the interest rate to 2% but they would not have to write down the principle balance. The new interest rate would only need to be for a term of 3 to 5 years so that the home’s value would return to the previous level. The borrower would be able to stay in their home and ride out the downturn in the market. The bank does not have to write off a loan but rather just accept a lower return on investment for a few years. Everyone wins in this scenario and the recovery is given a shot in the arm by reducing the number of homes that are foreclosed on and put back on the market. Home prices will stabilize faster leading to a quicker real estate recovery. Certainly there are some details to work out but this is the idea I have been promoting for a year to deaf ears!!

I imagine that one of the biggest downsides to being foreclosed upon is being displaced from what had been your home. What this "right to rent" program will do is make the whole foreclosure process more appealing to the person defaulting on his mortgage. If I was underwater on my mortgage I'd call my bank in a heartbeat and tell them to rip up the mortgage, I want to be a renter. Suddenly my negative equity has magically disappeared but my life has not been disrupted. Basically making home buying a "heads I win, tails you lose" situation.

Make no mistake, this is still a foreclosure just with less of a stigma. I think this program will create an incentive for more people to default on their mortgages, which is the last thing that we need right now.

I do not believe this is the best idea. Asking homeowners to rent a property they use to own may strike a nerve with many ex-home owners. I live in Phoenix and because prices have dropped 30+% many investors want to buy. Part of the problem is homes are so badly destored from homeowners who are upset their banks wouldn't "work" with them on the mortgage. So now we want the lenders to ask them to live there and pay rent with no upside like equity? Also, many people want to live closer to the city to avoid commuting because they fear gas prices will inevitably rise. Therefore, the suburbs of Phoenix are oversupplied. This program could help but it will only prolong the problem. At some point we need to get to the bottom, if we are not already, and then let the laws of supply and demand control prices.

Brian from CA: Obama is ruining the future of the country because you can't buy a house at as high of a discount as you wanted? Get real man.

The market and the banksters were responsible for inflating the prices of homes to false and unreasonable highs. Leave the homeowner as the mortgage holder if it is the principal residence lower the mortgage to current market rates at a fixed thirty five year term of 5%, and make the monthly payment, according to the new standard. Its time the banks understood we have no simpathy for their corrupt paractices and will no longer permit their greed to influence what families need, homes to live in.

It's funny how one can read an article and still miss the point.

First off, those who bought homes they can't afford won't gain anything by this. They're renting, and any equity they put in their home is pretty much gone. Want to throw them out in the street, so they can't even rent a place? Well, that's pretty callous I'd say. Not sure what "punishment" you want to inflict on them for making a bad financial decision, but barring a family from renting (and remember, a lot of these people have families who are also hurt by this, including children) is absurd.

Second, the article makes it plain that the rent payments will reflect a fair market value of the house, not what's actually owed. So their rent will be lower than the mortgage they are paying, hopefully low enough for some of them to stay. This is not a fix it all, but some will be able to get help this way.

I don't want to send the wrong message here that I think it's ok those people made a bad decision and let us responsible ones take up the financial burden. No, I don't like that idea very much thank you, we own most of the equity in our house, did our own renovation and plan to have it paid off in a few years.

But at the same time I don't believe in the "kick a man when they're down" principle which I see in a lot of posts here. I'm sure that most if not all who got in this predicament have learned their lesson… do we need to keep kicking them until we figure they learned enough?

Those who cast the first stone, you know. I hope you'll never be in their shoes, but I also hope you can imagine yourselves in their shoes before you decide to deny them a helping hand.

I have been stating this for some time now; however, instead of "renting" the house the lender would do a "lease option" back to the original mortgagee. Borrower can qualify for a loan in 3 years after a foreclosure. With timely payments for 3 year, the lender would offer to sell the house back at say 90% of appraised value. Win/win situation for everyone. This would take hundreds of thousands of units/properties from the market & help to stabilize home prices. If the borrower/renter defaults, they would be evicted, which typically takes about 60 days instead of the cumbersome 8-12 mos of a regular foreclosure process.

If the investors would just so a modification then wouldn't have all this government crap.

For all of the individuals thinking that people can't afford the rents because they didn't pay the mortgage are wrong. 28% of americans are making a financial decision to walk away from the home because they are upside down more than 50%, why throw away your retirement. The banks aren't going to lend on a project in which it's going to loose money. That's the same thing with the home owner they don't want to be throwing thier money away and get no where, they can be adding that money to a retirement account. It's not because they can't afford it! Listen the american people are angry, why should main street and all these banks get assistance and give huge bonuses, when they can write down a loan and keep a home owner in the houase, and prevent further declinning markets? Sorry i feel no simpathy for the banks or investors who are getting stuck with all this inventory, had they worked with the homeowner prior to all this devistation, it would have prevented all of the declinning values from occuring. Guess what, it's all those individuals who got huge bonuses from the taxpayers that are now buying the houses cash!

Incredibly flawed, academic (simple math avoided)and not realistic, banks are not property management companies…..all accurate and to the point commnets. It is a ridiculous notion that a large portion of the renters would not run down the property-just like they do many other places. Please stop piling one government bailout upon another. Everyone has pain to pay here that was an active member in creating the problem…..AND THE MARKET WILL FORCE THEM TO BEAR IT. LEAVE THE MARKET ALONE AND ENFORCE THE REGULATIONS WE ALREADY HAVE!

Appraisers are not the people to set rental program amounts. There are company's which do national rate surveys and re-set rental rates for markets. Check out: http://www.falconamg.com for a national property management company that works with the mortgage servicing company as a virtual extension of their back office to do the property rentals for the nationwide network of empty homes. Neighborhoods, children in their schools, and communities need to be preserved based on the national scale of this problem

I think that it is a good idea, but needs to reflect some of the other factors in maintaining the property if you are a renter, and not the owner any more. Utilities, property taxes, insurance, all need to be maintained or initited in order to preserve the property in good marketable condition.

Who pays for the repairs and upkeep of these rentals?

The "right to rent" plan would have to be administered by another level of bureauacracy, no? Who decides market rent in an area with predominately RTR and or section 8 properties? Are renters, nee former owners, given any incentive to maintain the proerty wknowing it will be sold at any time? Are renters incentivized by assured lease terms and are given first right of refusal when a selling option is given? Are banks anxious to become property managers?

The Gov. doesn't care about first time buyers and affordability, they care only about keeping prices articially inflated. So if the 'l-owner' becomes a renter — well then, the property does not go into foreclosure and values stay inflated. Problem solved — NOT!

Why would lenders who are low on capital themselves rent out a property if they could sell the property and use the money on someone who has not foreclosed in the last year?

To the government, are you serious?

What more "rights" do these people deserve? Reward the irresponsible and the responsible continue to be punished.

Then not only will housing prices be in the gutter but the massive influx on homes for rent will destroy the rental rates. How are landlords and apartment buildings going to compete with banks. End result apartment owners and landlords can't pay there high mortgages and then they are forclosed on. LEAVE REAL ESTATE ALONE!! Soon as unemployment levels out investors will pick these forclosures up.

Most owners can't make payments due to loss of jobs…they would not be able to pay "market rent" either. Why not just have lenders suspend payments for 9 mos to 1 year and tack them on to the end of the loan but also allow the home owner to make what ever payment they could during that time??? This keeps them in their homes, lender forgoes forecloures costs and gives owner time to find a job. That is what I call a WIN WIN.

A houseowner that is foreclosed on and becomes a renter on the foreclosed property because of this gov't program will be subjected to eviction in case rent is not paid as agreed upon. Just as the rules for an ordinary renter. This is a win-win solution for the economy. The market inventory for REOs will not be inflated any further thus home values for the affected neighborhoods will hold up because we will be stopping lender's fire sales. As an incentive for the lender the US treasury can offer to loan money to the extent of 50% FMV at reasonable rates against this foreclosed properties. The lender will then have a chance to recover their losses because of the expected tightening of supply and demand. Only then can lenders unload the property say 5years after putting it up as rental. My two cents worth.

I am sure the banks will love having to pay the taxes and insurance on owned properties.

Same property, same price, correct?…if the homeowner can afford the payments to rent, then they could afford the payments to buy, right? The new buyers (investors) are not losing money on monthly rent, they are actually charging the renter more than they are paying back in mortgate.
Doesn't make sense to me at all.

it seems everything in this country will belong to banks and we will get change to buy coca-cola. middle class living in own houses pretty soon will be a history in US.

Of course, there are pro's and con's to this question. As a Mortgage Broker for 35 yrs. the foreclosed homes, Short Sales, Bank Sales are really hurting the home values in every market of the country. If the lender can negotiate with the homeowner, what is affordable that would be helpful, however, the major question is "WHY" DID THEY STOP MAKING THEIR MORTGAGE PAYMENTS IN THE FIRST PLACE???? So each case has to be anaylized!! Which is wehere the major hold up is in the banking industry. The Banks DO NOT have qualified staf to handle this outrageous number of delinquent loans,they historically will NOT hire additional help to get the job done, because when it gets cleared up (who knows when) they will then have to lay off the hired staff and they don't want to then pay for the unemployment. So,, the beat goes on !!
My frustration, at this point, is why don't they hire "Independent Contractor's" who are "expewrienced" in this business, have no need for bene's and can afford to work independently til the whole mess gets cleared up. For a Bank to take 4 months to agree to a "Short Sale" with a qualified buyer is absouletly unbelievable. As a "banker" mortgage person it is embarrasing.

Wouldn't it be saving a lot of money and helping everyone if every mortgage holder in America was given a loan at 4% fixed for thirty years at 80% of the appraised value of their home. If the mortgage holdeR didn't want to do this, the government (Fannie Mae, Freddie Mac, etc.) could provide them.

I like it, the eviction process is so much easier than the foreclosure process.

Julian

There is such a program out there, its sponsored by the government, Housing & Urban Development, HUD, also known as Section 8, below market rents for those who cannot afford higher rents in higher value properties.

I've got the best idea of all. Pay them to stay !

The bank pays the occupants just enough money to maintain the necessary utilities – electric, natural gas (if it exists), and water, sewer, garbage pickup.

The bank would have to pay good money to change the billing for all the utilities; this is one way to avoid that, and keep the services active – but still in the occupant's names, not the banks' name.

If the occupants have to pay rent, then state and municipal laws will regulate the bank's relationship with the renter, and renters can be very ornery about their interpretation of "renter's rights".

But as paid house-sitters, there are no renter's rights for the banks to contend with.

What about labor laws, you might ask ? I don't know, but I would argue the occupants are not allowed to do any work like painting or the like that changes the property valuation, just the same keep-it-clean-and-neat any person proud of their living quarters would do.

This way, the occupants have an interest in keeping the house safe and the neighborhood safe for themselves – thus keeping looters from removing plumbing and appliances.

The bank does reserve the right to display the house to potential buyers and show the inside of the house, and if the occupants don't keep it clean, they get reminded they will have to find another place to live really quickly.

Josh of Atlanta said "No pay = no stay has worked for a thousand years. Remember, when you try to defy bedrock financial principals your get in trouble, it just does not work."

I will remind Josh that until a few decades ago, the banks owned the lien on the house, but when the financial weasels began converting the mortgages to securities, THEY broke the rule that the lien-holder should have a keen interest in the status of the property that backed the lien. Wall Street cheated, and got burned really bad, and everyone who had put money up for Wall Street to play with also got burned – 401(k) and pension funds included.

The brats on Wall Street have an attitude "I can tell you what to do, but you can't tell me what I can do, because I have more money than you do" which they use to defy regulation and common sense.

It's time for the rest of us to constrain them back into their little cages.

But I do not digress. Who will supply the money to pay those people to stay in their foreclosed homes ? How about Wall Street ? Names like John Thain, every employee of AIG that got bonuses, and especially Goldman Sachs !! They sure have a lot of money coming in from bonuses. Make them learn and earn the right to claim they can own a lien on a mortgaged home – not a securitized interest, the actual lien !!

Government mandates for anything are always problematic. Just in general, such an approach should only even be looked at after all other options have been proved unworkable.

So far on this issue, I haven't seen any other options even floated.

It is, at least to me, an obvious fact that excessive numbers of unoccupied homes makes us all poorer. It must be better to have SOMEONE living in that building and the owners getting SOMETHING out of their investment.

If the banks are unwilling or (more likely) unable on a practical basis to rent out the property they own, then I think we are better off, to excellerate, rather then slow, the process of selling foreclosed houses. Either get an owner occupying the house, or an investor who, as in individual, can evaluate the rental market and rent the building at what ever price works.

Will this depress rental prices? Of course. Is this bad? Probably not. As long as there is a glut of houses existing the price of occupying a house will, and should, go lower.

When expanding populations and attrition in the existing houses start to create a shortage, prices will go up and building will resume.

That's the way its supposed to work. Right?

This is yet further "group insanity" coming out of Washington. What is being suggested here is basically serfdom. We pay our taxes. The Federal Reserve then gives our tax dollars to the banks and brokerage firms. These companys charge us interest and fees for loaning the money back to us. Now the government wants to give them the deeds to our houses. The purpose of our life will be to serve CitiBank and Bank of America. Is anyone out there just a little concerned about the big picture developing here? Does National Socialism really sound like a good idea? I assume that it's only a matter of time before we have mandatory government service and brown uniforms.

Yea,… that's the idea. Let's have the housing market "rebound". What is that going to be, $1M for a 3bdr for a working family with 100K/year? How about you, your kids and you grand kids paying for the same house that you bought, and BTW is going to be rotten wood in you lifetime? And how to “qualify” them? Oh… we know! Lending without questions. Who needs affordable housing when a few can make fortunes?

Why is the government so bent on preventing the bubble from deflating? Home prices are not just dropping, the real estate bubble is normalizing. Yes, foreclosures hurt home values all around, but they should because the values of homes all around are still inflated. If you look at historical data for real estate appreciation, even after all the depreciation in the past two years, home prices are still higher than they should be.

Let the system flush the bubble out, and stop prolonging the pain with ridiculous bailouts that support irresponsibility and blow the already terrible national budget even more out of proportion.

It's just another communist idea. We have two government branches taken by the communists already. One more push and the third one goes as well. Then we'll just "change" the name USA for the USSR ot Korea or Cuba. It's time to stop all public and government programs, which will be bankrupt anyway sooner or later. Let's return to real american values – capitalism, honesty and responsibility – before it's too late.

I think some of the post are overlooking the economics behind market rent. Typically, market rent is between 4 and 7 % of a properties value. So if a homeowner who bought a $400,000 a few years back and has a mortgage payment of approximately $2,600 per month including taxes and insurance can now rent, he/she may be able to afford the market rent which (taking the midpoint 5.5%) would be approximately $1,500 per month assuming the house is worth $330,000 or so now. Although this may make some angry, it may be the best solution. And remember, sometimes the best solution is the one that costs society the least not the one that makes society the most. Think Game Theory.

Concerning affordability of rent over mortgage….

Speaking for myself, my property value is 60% of what it was when it was appraised in April of 2008. Consequently, a mortgage at the current (falling) value would be significantly more affordable than simply refinancing my current mortgage at 4.5%

Now before you jump down my throat…my wife and I would be thrilled to refinance our mortgage at the original value but with a current rate (+ the thousands the bank will charge for the refinance of course) HOWEVER the bank won't even talk to me because I am 40% underwater (according to their automated appraisal system).

Even if they would accept a short sale, they won't give a potential buyer a loan because of the recent history if plummeting valuation.

I'm trying to do the right thing here but ouch. And my kids are due to inherit the tab for banking systems bailout bill.

You don't do time for Wall Street crime.

Instead of bailing out banks the funds should have bailed out homeowners. Reduce their debt by 50% or redo mortgages at 2% across the board. The banks get paid, the homeowners get a
relief and have extra cash to buy the frivolous things at Target that they need to do in order to get the consumers spending and helping the ecconomy…what's wrong with this scenerio….

Banks have been given enormous amount of hlep and they are still not passing this on the the homeowners./..reduce the rates of those who are making thier payments before they too crash along with all the rest…reward Responsibility not Irresponsibility…

Next ones to fall are the A paper borrowers….

It's a terrible idea. Lenders as landlords. At best, this only helps property management firms. It also ties up the property and pushes foreclosure further out. Foreclosure will happen. It is prolonging the pain of the market correction, not fixing it.

Other posters are correct. There is no reason to believe that people who can't make a mortgage payment could make a rent payment. I recently bought a distressed property as my new primary residence, and I can say that after accounting for the tax deductions, my mortgage is significantly cheaper than rent would be on a house like mine. And I live in a market that has done relatively well. This proposal plays on the perception that foreclosures are still mostly products of greedy evil bankers jacking up interest rates, when in fact rates are quite low historically speaking. A perception that some ideologies seek to maintain in order to justify their proposals.

On the other hand, the proposal is not completely without merit. For those relatively few that could and would make payments if only they were slightly lower, the rent would indeed be cheaper than the mortgage payment IF the mortgage is at a far higher principle than the house is presently worth. So this program could help, a bit, but it's no panacea. Furthermore, I see no reason to refer to the proposal as government intervention – the banks could try to rent foreclosures to previous occupants on their own.

Why even allow the banks to foreclose? Force them to rent for two years at a predetermined rate based on the true market value of the home at a low interest rate (4%?). In most markets this would cut the cost of living there by 40 – 50%. After the two years, the homeowner should then have the option of returning to paying the mortgage if they get the right deal from the bank. The only other option they then have is to do a true loan modification, not the fake ones they are now offering.

This is retarded. They are not making mortgage payments now, so why would they pay rent! Then the bank has to evict them. Not to mention who has to maintain the homes. The so called "tenant" or the bank. Again waisting my tax money for people who can't read.

Home ownership isnt the same anymore. People want to own for the tax write off and hopefully make money on the property.Our grandparentd of past owned for differnt reasons than people today.Everyone is so cocerned about how much is my home worth? Thats why people took out all their equity when things were good and did it on a bad loan choice.Your home should be a home and not a credit card.Buy a home you can afford and enjoy it ,raise a family and dont worry about what your home is worth in dollars but how much it is worth personally.

What about the states that have passed homeowner protection foreclosure laws lately where you can't leaseback to the owner that is being foreclosed?

Yes, let's have the gov't meddle in the market. It's worked out so well up to this point.

Jeff makes a good point re: the ability of someone to make a rental payment when they cannot make a mortgage payment, especially when low interest rates have made mortgages so reasonable. I also appreciate the regulatory hurdles. Still, keeping a vested party in a home makes sense, so long as the deal the homeowner/renter is offered is reasonable and not a give-away. I'd like any program to preclude more government cash from being spent (i.e. borrowed). But the homeowner needs some upside motivation too. What about a sharing of equity gains in the eventual sale of the property, years later?

So what comes next? If my car gets repossesed, does my bank have to rent it back to me? Maybe people who made poor decisions, like speculating that the house they couldn't afford in the first place is going to bring them financial freedom, should live with the consequences. Theres a new concept for you, accountability for ones actions. (sarcasm intended)

This basic concept is incredibly flawed. If a consumer cannot make their mortage payment why should anyone assume they will be able to make a market rent payment? Further this assumes one size fits all. Why did they fall behind on their payments? loss of income through possible job loss, divorce, sickness etc? Folks don't stop making payments simply becuase their house value fell, they have met some problem that has caused them to fall behind and stay behind.

Financial institutions that end up holding mortgages are not set up to be property management companies. Who will fix the broken pipes or the faulty air conditioner? Why would it be assumed that the finanacial instution which had a secured loan will now be able to afford the maintenence and repairs on property? They held the mortgage becuase they borrowed at one rate and lent at a hogher rate. That is their profit is typically i bthe spread not in the valuation of the real estate.

The macro economy continues to improve as these homes are eventually absorbed back into the local economy at levels that make them more afordable, if this process is stopped then you run the chance of killing the rebound in home values which cannot begin until foreclosed propeties are absorbed back into circulation with new owners.

This is not a real world solution, it is a academic proposal that denies the realty of the reasons behind foreclsoue and the financial wherewithal of the holders of mortgages.

Please explain: Homeowner can not pay mortgage and rents are usually based on home value, i.e. a 200K home rents for more than a 50K, right? So, unless the rent is much less than the mortgage how can the owner afford?

I think this just might be another give away that will blow up in lenders faces.

The problem that needs to be corrected is that people bought houses they could not afford, lender loaned money to people that could not pay it back – and I am not talking about those that lost their good jobs; lender were making loans to people that had little or no steady income.

I have a mortgage on a home that is less that I could qualify by traditional standards. I have paid the mortgage on time for over 10 years, I have equity in the home, I have had to make sacrifices like not buying lots of toys and luxury vacations to maintain my home. So now we want to tell one of my sorry neighbors that could not afford a house in the first place: here you go, you screwed the mortgage company, we will just let you rent it. Do you really think they care? Is this another free ride on the backs of the responsible buyers?

Why not offer these homes, at what will probably in many cases be fire sale prices, to investors and give them the name of the mortgage defaulter and let them offer to rent it if they want to at market value. If the home was sold at much less than the defaulter paid, yes the rent could be lower than the mortgage.

No pay = no stay has worked for a thousand years. Remember, when you try to defy bedrock financial principals your get in trouble, it just does not work.

Let me give my 2 cents worth. The progam that the Obama has designed does NOT help the people who need it. It is only for Fannie and Freddie loans and does not apply to subprime deals and those are the people struggling the most.

The HARP program was not thought out at all.

In response to the person who asked why would they pay rent? Because people in jeopardy of losing their home because they can refi due to pre payment penalties and adjusted mortgage would really like to keep their homes.

I am a former mortgage broker who never NEVER did a pay option arm.

What about people who would like to buy a house within comfort level.
Why are we still trying to inflate a bubble.. The more we do that the slower the economy will grow .. Amazingly we are trying to help a speculator who bought a house for investment used up its equity and now wants TAX money to still keep the house…Amazing

The options that you offer in your pool are at best inadequate and seem to channel the opinions on one idea: you hate government.
First, if one has no money to pay mortgage, it is likely would have troubles paying a rent, unless is a low amount, adequate for the situation.
Second, the folks that created the situation are the ones you mention often, the lenders. Not the government.
To answer your, question, most of the families in a difficult financial situation should be allowed to continue to stay in their homes, until their financial situation improves, paying a bellow-market rent, at a rate mandated by government. The foreclosure procedures should be frozen for 2 or 3 years for the people making the proof of continued job search. If they have been worthy for getting a mortgage once, they should be credited with the ability of recovering from the difficult situation they are in. In the end, lenders getting a rent and keeping people in their homes should be in a far better position than having empty properties degrading. Or not?

It might work if there some advantage afforded the former homeowner. The next question would be, Can they afford to pay rent if they lost their home because of unemployment?

Obama is absolutely destroying the future of this country! The responsible members of Gen Y, who have been waiting patiently for homes, are now being forced to once again take out ridiculous jumbo loans to purchase houses in california because obamas meddling is proping up the market. For every irresponsible person who losses there home, someone more deserving gains a home.

The government starting & running another program is the last thing we need. Ronald Reagan once said the closest thing on earth to life everlasting, is a government program.

A homeowner who forecloses or does a short sale can currently stay in his own home in many states. They can even can buy that home again in several years at a lower price than before. The key is for them to find reputable a Lease-to-Own program, and for the investors that run them to have access to enough financing to buy more homes.

Currently banks are the primary impediment since they don't want to loan money to investors, and part of the reason is government agencies (FHA, FNMA, Freddie) set a limit on how many properties an investor should own.

Get rid of dumb legislation & government programs, don't create more!

There are many investors who waited till the right time after buying a person's home then selling the equity. Now they are in jail. What is the difference with renting to those in financial trouble then selling the house out from under them when the market is right. There is no loyalty in that. Those that bought their homes and now can't afford them had eyes bigger than their wallet. Now the rest of us must pay for the greed of the ME Generation.

That's a huge waste of time and effort. If someone can't pay their mortgage, why would they pay their rent?

A renter gives up any equity appreciation. Because home prices have declined, that may not seem like much. But when home prices re-inflate in 5 years, the renter is going to miss out, and the lender will take the upside. Banks, by the way, can't rent directly, they would have to sell to investors in most cases (regulations prohibit banks from being landlords). Rent with an option to buy might be a better way to restore equity on a more reasonable basis, though there are significant regulatory hurdles for lender-owned housing.

The survey under your column is a little misleading. The government IS always meddling in the housing market, whether we like it or not. The point is, should the government meddle in a way that helps underwater homeowners not get kicked out on the street? Or should the government give more money to banks?