Before it recessed for the month of August, the House approved the Neighborhood Preservation Act H.R. 2529, which would authorize banks and lending institutions insured by the Federal Deposit Insurance Corp. to allow foreclosed homeowners to remain in their homes as renters on long term leases.
The update on the pending resolution was posted online last week by the Center for Economic Policy and Research.
The measure would remove any legal issues that could be raised if a bank were to voluntarily enter a rental agreement with a foreclosed homeowner.
Some residential real estate analysts believe that while the measure would 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.
The reason: the decision to allow homeowners to become long-term renters will be up to individual banks.
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.
Kurt Bunck, a realtor and property manager for a portfolio of 110 single family homes in the Pikes Peak region, said most banks would likely “tread lightly” when considering such a move. He also raised key questions such lenders should ask.
“Half the people who can’t pay their mortgage probably can’t afford the rent anyhow. Some could, but it would probably necessitate banks hiring more property managers – different managers for different geographical areas — and that could take a long time to put into place.
“Usually those in foreclosure have pretty bad credit. Would they have to qualify as regular renters? Each circumstance is different. Some facing foreclosure may not currently live in their homes. If the bill passes, it could be complicated to set up,” he said.