Congress Takes First Step Towards Allowing Foreclosed Homeowners to Stay as Renters

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CEPR
July 29, 2009

In a voice vote, the House today approved the Neighborhood Preservation Act (HR 2529) which would explicitly authorize institutions insured by the FDIC to allow foreclosed homeowners to remain in their homes as renters on long term leases. This measure would remove any legal issues that could be raised if a bank were to voluntarily enter a rental agreement with a foreclosed homeowner.

While this measure 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. 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.

Given the limited impact to date of the various mortgage modification programs that have been put in place, a Right to Rent law seems the only plausible route toward providing homeowners with security in their house.