The present essay explores both conventional and creative options for reducing the risk of foreclosure. Historical, current, and proposed government and private industry- initiated efforts are discussed in order to highlight the prevalence of the problem as well as the inadequacy of current solutions. The option of renting to avoid default or regain ownership of homesteads which have entered foreclosure, including the Right to Rent Plan (Baker, 2009), is explored as a viable low-risk, high-reward solution for homeowners, lenders, and taxpayers alike.
The Current State of Affairs
According to the Bureau of Labor Statistics (2009), more than 2.3 million homeowners faced foreclosure proceedings in 2008. This was a marked increase of 81% over the previous year. During the same time, unemployment rates skyrocketed. From December 2007 through February, 2009, more than 3.5 million payroll employees lost their jobs (Bureau of Labor Statistics, 2009). Increases in unemployment ultimately lead to increases in credit defaults and foreclosures, as borrowers become unable to financially afford payments. In fact, even though predatory lending practices have been repeatedly blamed, borrowe...
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...eved from: http://www.ocf.berkeley.edu/~dhartley/research_docs/foreclosure_supply_vs_disamenity _20090727.pdf
Quercia, R., Ding, L., & Ratcliffe, J. (Mar 2009). Loan modifications and redefault risk: An examination of short-term impact. Working paper, Center for Community Capital, The
Schultz, D. (Jan 27, 2005). Foreclosure: Cause and effects. Retrieved from: http://EzineArticles.com/?expert=Dan_Schultz
Stolberg, S.G., & Andrews, E.L. (2009). $275 billion plan seeks to address housing crisis. Retrieved from: http://www.nytimes.com/2009/02/19/business/19housing.html?_r=2&hp
University of North Carolina at Chapel Hill. Retrieved from: http://www.ccc.unc.edu/documents/LM_March3_%202009_final.pdf
White, A. M. (2009). Deleveraging the American homeowner: The Failure of 2008 voluntary mortgage contract modifications. 41 Connecticut Law Review, 1107.
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