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A Different Take on “Government Housing”
By JLP | July 14, 2009
Check out what I just saw on Reuters:
NEW YORK, July 14 (Reuters) – U.S. government officials are weighing a plan that would let borrowers who have fallen behind on their mortgage payments avoid eviction by renting their homes instead, sources familiar with the administration’s thinking said on Tuesday.
Under one idea being discussed, delinquent homeowners would surrender ownership of their homes but would continue to live in the property for several years, the sources told Reuters.
Officials are also considering whether the government should make mortgage payments on behalf of borrowers who cannot keep up with their home loans, tapping an unused portion of a $50 billion housing aid kitty.
As part of this plan, jobless borrowers might receive a housing stipend along with regular unemployment benefits, the sources said. (Reporting by Patrick Rucker; Editing by Diane Craft)
This is taking government housing to a whole new level. It also raises a whole bunch of questions:
• What would be the implications of such a plan?
• Does the government continue to pay the mortgage?
• What happens after several years of the former homeowner paying rent? Do they get to buy the house back? For what price?
• What if they can’t afford the rent?
• Where does it end?
Topics: Credit Crisis, Mortgages | 11 Comments »
July 14th, 2009 at 8:01 pm
That’s getting a little scary, government owned companies, government owned homes . . . what won’t you go to the government for in the future?
July 14th, 2009 at 9:27 pm
Your last question is the best: Where does it end?
July 15th, 2009 at 12:45 am
So, when I try to buy a house, I will be competing with the government, which gets to use my tax money to outbid me. Wonderful.
July 15th, 2009 at 6:53 am
Just how quickly will the $50 billion housing aid kitty be spent? I don’t think it would take long…and then what? Oh, wait, that’s when our taxes get raised again!
July 15th, 2009 at 9:56 am
For some people I think this is an interesting idea, like those that are losing their homes because of unemployment. These people have to live somewhere, and in some instances (like in MA), the government already is footing the bill for hotel rooms for these people and families. Maybe the government can get a better deal from banks than these hotel owners.
July 15th, 2009 at 10:12 am
“Where does it end?”
“Everything within the State, nothing outside the State.”
That’s where it ends.
July 15th, 2009 at 10:44 am
If the government does it, then the government should own the home. Then a) if the owner stops paying, the government should have option to foreclose/settle with bank. b) the money government pays should be treated as a loan c) if the price of the home (ever) goes up, all the cash cleared from the sale after the mortgage is paid should go to the government.
July 15th, 2009 at 1:20 pm
“Where does it end?” pretty much sums up the whole problem. Except for canceling all government interference ASAP, this can’t end well.
July 15th, 2009 at 4:32 pm
I suggested something like this awhile ago, although I think it should be region-specific and not person-specific. It should not be used to keep people in houses, but it could be used in places where the market would otherwise disappear or neighborhoods would end up filled with abandoned houses. There are places where foreclosures and REOs do sell fairly quickly and empty houses are rare (ie, Socal). There are other places where REOs sit vacant for months or years, and “block foreclosures” cause massive neighborhood degradation.
This sort of area is a candidate for a sort of “in-place foreclosure” approach, where an RTC-style entity buys the house via a foreclosure auction, lets the person rent the house at some reasonable rent, and lets them buy the house back when the economy improves, assuming they pay the rent on time and aren’t completely broke. If they can’t/won’t pay the rent, they’re on the street and the house is rented to someone else who can get the same deal.
July 15th, 2009 at 11:24 pm
And who is going to track all this? Sounds like there will be a 500% increase in the need for accounting majors!
July 17th, 2009 at 7:20 am
It will end with a revolution.