With the HAMP program winding down as almost a total failure; many homeowner advocates are proposing a new idea that’s gaining support. The “right to rent” programs which would give homeowners facing foreclosure the right to remain in their home and pay rent to the mortgage servicer for a period of up to five years. The “Right To Rent Act” which is being promoted to legislators, would not only give homeowners the right to rent the property but would also have an independent appraiser determine the fair-market rental price of the property, which theoretically could result in the homeowner paying significantly less in rent than what they paid for their mortgage. But there are a few possible problems with this proposal; despite the obvious benefits.
Let’s take a look at a few issues that may arise:
- While a right to rent could help some families avoid foreclosure evictions and homelessness, it will only work if they family has enough income to pay the rent. What will happen to homeowners facing foreclosure who don’t have jobs or other income?
- When people signup to become homeowners they’re doing so because…well…because they want to be homeowners and NOT renters. What will happen to the equity and other investments that homeowners facing foreclosure have made in their homes? Will the appraisers take that into consideration as they decide how much the home should rent for?
- And speaking of investments, who will be responsible for the maintenance of the property, for the insurance, for the taxes etc.? What will happen when the toilet floods and the gutters need cleaning? One of the benefits of renting is that the responsibilities of homeownership are absent. Are we proposing to make these homeowners facing foreclosure into renters who still are responsible for all the little and expensive things that comes with homeownership without the benefits?