Baker-Samwick does allow rental properties to be sold

By Felix Salmon
July 15, 2009

John Carney thinks that the Baker-Samwick plan would create “havoc” in securitized mortgages, and points to Tom Lindmark:

I suspect that more than a few of the investors that own these mortgages might not be thrilled to see their contractual rights to foreclose on the property and dispose of it are going to be real happy to learn they’ve just been turned into long term investors in real property. They probably just want to get whatever is left over from a bad investment and lick their wounds for awhile. Instead, the government is going to make them stay in the game.

Let’s nip this one in the bud: there is nothing in this proposal which says that the owner of the property can’t sell it. Indeed, quite the opposite: Baker and Samwick write that “the mortgage holder is free to hold or sell the property as they choose”. Which in turn means there will be no havoc wreaked in securitized mortgages.

Banks, once they’ve foreclosed on a property, are still free to sell it, if they so desire, to the highest bidder. But the buyer of the house will have to continue renting it, at market rates, to its current inhabitants, until they either fall behind on their rent or move out. Which is no great hardship — that’s what landlords do.

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