How to Help Homeowners, Without HAMP
The Home Affordable Modification Program, HAMP, continues to sputter, converting 26.7 percent fewer trial modifications into permanent modifications in September than in August.
Although the foreclosure crisis continues, the government programs to help ease it are abating. The HAMP scorecard proudly declares, “Backlog of HAMP trial modifications aged six months or longer falls to fewer than 95,000.” That really means the program will dwindle to its end having helped one-tenth of the 3 to 4 million homeowners the Obama administration said it would help.
Foreclosure and housing remains a major drag on the economy — *the *major drag, save for unemployment, a coupled problem given that the unemployed have much higher rates of foreclosure and foreclosure prevents workers from moving for new jobs.
Yet, the government retains many options to help. One which would cost virtually nothing is right to rent legislation — promoted, again, by the Center for Economic and Policy Research yesterday. The Right to Rent Act, or H.R. 5028, would give homeowners undergoing foreclosure the right to rent their property for up to five years. An independent appraiser would determine fair market-price rent, which the foreclosing bank would collect.
“This would give homeowners an important degree of security, since they could not simply be thrown out on the streets,” Dean Baker and Hye Jin Rho write in the report. “This policy should also benefit neighborhoods in the most hard-hit areas, since they would not have large numbers of vacant homes following foreclosures.”
The report argues that the costs for banks to foreclose are high, both because of the expensive legal proceedings and because foreclosed homes drag down neighborhoods’ real-estate values and sell for less than market price themselves.
And renting would help families remain in their homes, with a substantial reduction in costs. In most cities in the United States, renting is significantly cheaper than paying a mortgage — by $1,586 a month in Los Angeles, and more than $1,000 in New York, San Francisco and other major cities. (The cost differential is less in places like Chicago, and minimal in some cities, like Detroit.)