Felix Salmon

Right-to-rent becomes a reality

By Felix Salmon
November 11, 2009

Something has happened on the right-to-rent front! It comes from Fannie Mae and it’s called deed-for-lease, and I’m basically in full agreement with Dean Baker on this one: it’s a step in the right direction, but it’s still a far cry from what should be happening. Not only should the lease be for more than 12 months, but the program should be rolled out to all mortgages, not just those owned by Fannie Mae.

In the meantime, it’ll be fascinating to see just how popular this program is. Lots of bright ideas get rolled out and fail to gain traction; Fannie Mae should keep a close eye on this one, and make it more attractive if people aren’t making use of it. And Freddie Mac should in any case try to one-up them, perhaps with a three-year lease. Let’s keep the momentum going!

(Via Indiviglio)

3 comments so far | RSS Comments RSS

We’ve been here before. Joe Nocera in his Oct. 18, 2008 NYT column “Shouldn’t We Rescue Housing?” provided a forum for Daniel Alpert of Westwood Capital to explain in detail his Freedom Recovery Plan (http://www.westwoodcapital.com/opinion/ index.php?option=com_content&view=catego ry&layout=blog&id=39&Itemid=61).

Therein, Alpert called for the seller and buyer to acknowledge their mutual misjudgement by doing two things. The seller takes back the deed presumably because the purchaser has little or no equity in the house. Second, the seller gives the purchase a 5 yr lease at the current rental market rate. Both lose something but the owner/now renter has shelter and is not on the street.

That was a year ago and little has changed since then. I have no faith that it will.

Posted by RLH | Report as abusive

I’m sorry, but it is an insane suggestion that banks should be required to rent to people who default on their mortgage loans.

First of all, if you thought bankers were greedy bastards when they were selling people mortgages, what kind of landlords (to the very people who are killing their balance sheets) do you think they’ll make?

Second, a “right-to-rent” will kill the salvage value of the home on loans gone bad. If the bank can only sell the house to people willing to become landlords, the demand for foreclosed homes shrinks considerably. This can only make new mortgages more expensive for everyone else and runs completely counter to the current efforts to stimulate home sales.

Third, even if banks could sell most of the foreclosed properties to professional landlords in relatively short order, those transations will not be instantaneous. Citigroup et al will have to hire property managers all across the country to manage/maintain the houses in the meantime. This also increases the cost of mortgage credit.

Posted by ateamrules | Report as abusive

…or we could just make this easier and nationalize housing.


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