Solving the Foreclosure Crisis: Renting to Re-Own as an Option for Homeowners and Lenders

Solving the Foreclosure Crisis: Renting to Re-Own as an Option for Homeowners and Lenders

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As the foreclosure crisis in the United States continues to spiral, increasing attention is being given to novel and creative solutions for reducing the risk of mortgage default. The Obama administration has proposed several government-backed programs to help homeowners stay in their homes, and private lenders have tried various approaches to stabilize the economic situation. To date, none of the enacted efforts has substantially improved the crisis, and as such the number of homeowners filing for bankruptcy and entering foreclosure continues to mount.
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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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:

Stolberg, S.G., & Andrews, E.L. (2009). $275 billion plan seeks to address housing crisis. Retrieved from:

University of North Carolina at Chapel Hill. Retrieved from:

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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