WASHINGTON, DC – July 16, 2009 – (RealEstateRama) — U.S. Senator Charles E. Schumer (D-NY) gave a preliminary endorsement Thursday to a proposal under consideration by the Obama administration that would allow troubled homeowners on the verge of foreclosure to remain in their homes as renters. The senator planned to discuss the potential benefits of the plan, and raise questions about how it would be administered, at a Senate hearing later today.
“This could make sense as a last resort for troubled homeowners who would otherwise lose their homes and find themselves with nowhere to live. A plan like this could reduce the number of vacant properties that put downward pressure on the values of neighboring homes,” Schumer said.
Reuters reported earlier this week that Treasury officials were mulling the plan, under which homeowners would forfeit ownership of their home to the original lender but would be allowed to continue occupying the residence as a renter. The original version of the proposal, first floated two years ago by economist Dean Baker, called for a bankruptcy judge to set the terms of the rental agreement and compel the bank to honor it. While the property could be sold, the rental agreement would have to be honored by any prospective buyer.
Schumer said he would bring the idea up at a Senate Banking Committee hearing scheduled for this morning. Herb Allison, the overseer of the Troubled Asset Relief Program, and an official from the Department of Housing and Urban Development were scheduled to testify. Schumer planned to raise questions about what consideration is being given to such a proposal and how might it work.
