FacebookTwitterGoogle+RedditEmail

The Mortgage-to-Lease Alternative to Foreclosure

by EILEEN APPELBAUM

The decline in housing prices as the bubble popped and the air went out of the housing market has devastated families forced out of foreclosed homes and communities with boarded up and deteriorating properties.  An obvious solution, with support from both right and left and proposed in legislation introduced by Congressman Raul Grijalva (D–AZ), is to let home owners give up the deed to their home but continue to live there as renters. With market rents far below the monthly payment on bubble-inflated mortgages, this solution could work for millions of cash-strapped families.

Fannie Mae, the quasi-public mortgage agency bailed out by taxpayers, has been reluctant to return the favor – preferring foreclosure to giving mortgage holders the option to remain in their homes as renters. Instead, it is Bank of America – owner of Countrywide, the robo-signing mortgage and foreclosure mill – that has stepped up to the plate to help out homeowners.

Yesterday, Bank of America announced that it would test a program that allows homeowners to remain in their homes as renters as an alternative to foreclosure. Under this plan, homeowners would give up ownership of their home and the bank would forgive the mortgage debt. They would then be able to continue to live in their homes as renters for up to three years.

Without second-guessing Bank of America’s motives, this is clearly a far better way to address the housing crisis than the government’s plan to have Fannie sell a big block of foreclosed homes to Wall Street investors and private equity firms. Private equity firms, who promise investors high returns in just a few years, see big profits to be made from buying up foreclosed homes and renting them out. Carrington Capital Management, which has teamed up with private equity firm Oak Tree Capital to create a $450 million fund to buy pools of foreclosed homes and rent them out, has a strategy it says will yield investors a 25 percent return over three years. That’s far above the returns that rental properties typically yield. It is likely that Fannie Mae will have to sell blocks of houses at a steep discount to attract the interest of private equity firms out to profit from the misery of underwater homeowners and make super returns. That would put the government in the business of directly transferring wealth to the wealthiest Americans.

Now that Bank of America has shown that there is a better way to help homeowners, it’s time for the government to adopt a mortgage-to-lease program. As a first step, Fannie Mae could immediately work with Bank of America to include mortgages owned by Fannie but serviced by B of A in the bank’s program.

Eileen Appelbaum is a senior economist at the Center for Economic and Policy Research and the co-author of ‘Leaves That Pay: Employer and Worker Experiences With Paid Family Leave in California.’

This article originally appeared in Economic Intelligence (U.S. News & World Report)

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

March 29, 2017
Jeffrey Sommers
Donald Trump and Steve Bannon: Real Threats More Serious Than Fake News Trafficked by Media
David Kowalski
Does Washington Want to Start a New War in the Balkans?
Patrick Cockburn
Bloodbath in West Mosul: Civilians Being Shot by Both ISIS and Iraqi Troops
Ron Forthofer
War and Propaganda
Matthew Stevenson
Letter From Phnom Penh
James Bovard
Peanuts Prove Congress is Incorrigible
Thomas Knapp
Presidential Golf Breaks: Good For America
Binoy Kampmark
Disaster as Joy: Cyclone Debbie Strikes
Peter Tatchell
Human Rights are Animal Rights!
George Wuerthner
Livestock Grazing vs. the Sage Grouse
Jesse Jackson
Trump Should Form a Bipartisan Coalition to Get Real Reforms
Thomas Mountain
Rwanda Indicts French Generals for 1994 Genocide
Clancy Sigal
President of Pain
Andrew Stewart
President Gina Raimondo?
Lawrence Wittner
Can Our Social Institutions Catch Up with Advances in Science and Technology?
March 28, 2017
Mike Whitney
Ending Syria’s Nightmare will Take Pressure From Below 
Mark Kernan
Memory Against Forgetting: the Resonance of Bloody Sunday
John McMurtry
Fake News: the Unravelling of US Empire From Within
Ron Jacobs
Mad Dog, Meet Eris, Queen of Strife
Michael J. Sainato
State Dept. Condemns Attacks on Russian Peaceful Protests, Ignores Those in America
Ted Rall
Five Things the Democrats Could Do to Save Their Party (But Probably Won’t)
Linn Washington Jr.
Judge Neil Gorsuch’s Hiring Practices: Privilege or Prejudice?
Philippe Marlière
Benoît Hamon, the Socialist Presidential Hopeful, is Good News for the French Left
Norman Pollack
Political Cannibalism: Eating America’s Vitals
Bruce Mastron
Obamacare? Trumpcare? Why Not Cubacare?
David Macaray
Hollywood Screen and TV Writers Call for Strike Vote
Christian Sorensen
We’ve Let Capitalism Kill the Planet
Rodolfo Acuna
What We Don’t Want to Know
Binoy Kampmark
The Futility of the Electronics Ban
Andrew Moss
Why ICE Raids Imperil Us All
March 27, 2017
Robert Hunziker
A Record-Setting Climate Going Bonkers
Frank Stricker
Why $15 an Hour Should be the Absolute Minimum Minimum Wage
Melvin Goodman
The Disappearance of Bipartisanship on the Intelligence Committees
Patrick Cockburn
ISIS’s Losses in Syria and Iraq Will Make It Difficult to Recruit
Russell Mokhiber
Single-Payer Bernie Morphs Into Public Option Dean
Gregory Barrett
Can Democracy Save Us?
Dave Lindorff
Budget Goes Military
John Heid
Disappeared on the Border: “Chase and Scatter” — to Death
Mark Weisbrot
The Troubling Financial Activities of an Ecuadorian Presidential Candidate
Robert Fisk
As ISIS’s Caliphate Shrinks, Syrian Anger Grows
Michael J. Sainato
Democratic Party Continues Shunning Popular Sanders Surrogates
Paul Bentley
Nazi Heritage: the Strange Saga of Chrystia Freeland’s Ukrainian Grandfather
Christopher Ketcham
Buddhism in the Storm
Thomas Barker
Platitudes in the Wake of London’s Terror Attack
Mike Hastie
Insane Truths: a Vietnam Vet on “Apocalypse Now, Redux”
FacebookTwitterGoogle+RedditEmail