The sluggish housing recovery is prompting President Barack Obama to consider ways to take foreclosed properties off the market and rent them until prices stabilize. According to an article in the Wall Street Journal, home prices nationally were 7.4 percent lower in May than they were a year earlier, but when distressed and foreclosed properties are taken out of the equation, the percentage drops to just over 0.4 percent. Foreclosed and distressed properties account for nearly a third of homes sold each month. When homes are unloaded at "fire sale" prices, property values drop by as much as 20 percent, worsening the crisis by potentially pushing more homeowners into foreclosure.
The logic behind the idea to rent the foreclosed homes is that taking them off the market will allow falling home prices to stabilize somewhat, while the income from rent will cover expenses on the home until the housing market recovers. Rents have increased nationwide as home prices have dropped and the pool of renters looking for homes rather than apartments has increased.
One sticking point to the proposal is that the government would turn into a landlord -- a role it is ill-equipped to play. So there's some discussion about selling thousands of foreclosures to private investors who would agree to act as landlords.
Meanwhile, infighting among banks is further stalling any resolution to the foreclosure crisis. Wells Fargo and Citigroup have said they should pay less than Bank of America and JP Morgan & Chase for violations on how they handled home foreclosuresbecause they claim they had fewer delinquent mortgages and are not as culpable in the housing crisis.
Last fall, talks began among those banks, plus Ally Financial, the 50 state attorneys general, the Treasury Department, Justice Department and Department of Housing and Urban Development to address violations in how the banks acted in foreclosure proceedings.
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