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Support Lacking For Right-To-Rent Proposal

A proposal to let borrowers in foreclosure stay in their home as tenants is still under review and is not likely to work out in the near future, according to Federal Housing Administration (FHA) David Stevens.

The "Right to Rent" system, first brought up by economist and Beat the Press columnist Dean Baker, would allow borrowers to rent their homes at current market rates instead of being evicted, provided they cooperated in the foreclosure process.

According to New York Times columnist David E. Kapell, a similar structure is already in effect in corporate bankruptcies, where firms were allowed to stay in business while working out solutions with their creditors. It would only be a matter of applying the same principles to homeowners, he said.

However, the plan has so far gotten mixed reactions in Congress. In an email to reporters, Commissioner Stevens said that they had found many challenges that could potentially limit the Right to Rent Program from having any positive effects.

Although they are continuing to study the proposal, Stevens said, they are putting more effort into reforms to the mortgage servicing and financing systems that would better benefit consumers and prevent more foreclosures.

Some of the problems pointed out include outlining the bank's new role as landlord, accounting problems, and addressing the gap between mortgage dues and rent during settlement. Basically, the losses would not be clearly directed in the process.

Andrea Risotto, spokeswoman for the Treasury Department, said that the Treasury supports "graceful exit" alternatives for homeowners in hardship, citing such programs as Home Affordable Loan Modification and the Home Affordable Foreclosure Alternatives.