Foreclosures -- from record high numbers to robo-signers of documents -- have been dominating the news this week. Here are a few picks from just today.
An estimated 3.5 million homes will be lost by the end of 2012, on top of 6.2 million already lost... Attorneys general in all 50 states have pledged a coordinated investigation into chaotic foreclosure practices by some of the nation’s largest banks. The Department of Justice is also looking into what happened, while some lawmakers are now calling for a nationwide moratorium on all foreclosures until the legal questions are settled. The Obama administration is insisting such a broad delay would hurt the economy.
Several of the largest lenders, including Bank of America and JP Morgan, thought they had to slam on the brakes to make sure the foreclosure process is being dealt with correctly. If they are concerned, the rest of us should be, too...
It is hard to find a good argument against a moratorium. The claim that it would be a disaster for the housing market is utter nonsense. Real-estate experts have been talking for the last two years about the huge "shadow inventory" of foreclosed homes that banks have held off the market. If the pipeline of newly foreclosed homes were temporarily stopped, they would just sell out of this shadow inventory.
Although the potential for chaos in the housing market and on bank balance sheets is rightly feared, there's an opportunity here, too... Here are four ideas kicking around the community of experts who follow the housing market...
Right-to-rent: Under a right-to-rent program, foreclosed homeowners would have the option of renting their home at fair-market value for five years. This means less disruption for them and fewer vacant properties blighting communities. Fannie Mae has been attempting a variant of this, but on a very small scale.
We should expand the program, particularly in areas where the housing market is extremely depressed. "It's got to be better than just throwing people out onto the street," says Dean Baker, the director of the Center for Economic and Policy Research. "The bank would be getting rent. They could sell the property, though it might have a tenant for five years. But given the situation these people are in, it's a bare minimum the government could do."