The Neighborhood Preservation Act could potentially help relieve some of the housing market’s foreclosure problems, as it would allow banks to rent out foreclosed homes. However, some lawmakers are concerned that the final decision is to be made by the banks — which may not be in the best interest of the homeowner. For more on this story, see the following article from HousingWire.
The House of Representatives this week passed a bill that would authorize federally-insured depository institutions and banks to lease real estate-owned homes for a limited period of time — up to five years.
The House approved HR 2529, the Neighborhood Preservation Act, in a voice vote Wednesday. The bill’s language allows banks covered through the Federal Deposit Insurance Corp. to lease back houses it owns through foreclosure.
By allowing these institutions to enter long-term leases with occupants of the foreclosed property or other parties to restrict the number of houses moving onto the market, the bill aims to keep unsold inventory down and in turn help stabilize home values and restore confidence in housing markets. It would also generate monthly payments and ultimately reduce the extent of the loss taken by the bank upon the property’s sale.
“Allowing depository institutions and affiliates of such institutions to lease foreclosed property will allow the institution or affiliate to dispose of such property into a presumably more stable market at the end of the lease term which would reduce the loss the institution or affiliate may otherwise be required to recognize upon disposition of the property,” the bill reads.
The bill’s authors tout it would not only preserve the aesthetic and economic values of a neighborhood, but allow families to remain in their homes as renters until they again have resources to become homeowners.
But even if passed, the decision to allow homeowners to remain in foreclosed properties as renters remains with the FDIC-member depository institution, an independent think tank points out in a statement on the bill.
The think tank, the Center for Economic and Policy Research (CEPR), called for passage of a right to rent law to allow all homeowners the option to remain in their homes after foreclosure.
“While this [bill] may allow some number of homeowners to stay in their homes as renters, it is unlikely to benefit the vast majority of homeowners who are facing foreclosure, since the decision to allow homeowners to become long-term renters will be left with the bank,” the CEPR said in its statement. “If Congress does want to give foreclosed homeowners the option to stay in their homes as renters, it will be necessary to pass legislation that explicitly gives them this right.”
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