The White House Has A New Idea For Housing- like it?

CLICK TO VIEW CLIP: If You Can't Pay the Mortgage, Pay Rent?

Connie on Fox Business July 15, 2009 to discuss with Liz and David if mortgage defaulters should be allowed to rent their homes. Below are some points that were discussed on that segment.

This could be a bad idea for the following reasons:

1. The Banks will need to manage this and it will cost them time and money to manage.

2. They will add property management to their growing list of tasks? This is not what they specialize in doing and they have their hands full with short-sales, REO's etc.

3. Historically speaking, a large percent of those that default on a loan re-default. If this is so, the banks could be dealing with many that stop paying rent. Resolving this could cost time and money.

4. This doesn't send a good message to responsible borrowers. And what are the consequences for renters that stop paying?

5. Before trying an idea like this we should further explore increasing demand amongst those that truly can afford to own a home. There is a lot of money on the sidelines just waiting for the right opportunity. (the tax credit is working so more tax credits with higher limits are needed for first-time buyers, a capital gains exemption for investors for a limited amount of time should also be considered, etc.) These incentives do not need a lot of management and oversight so they are also cost efficient.

6. There are benefits with this plan IF the renter is responsible and taking care of the property. It would be good for the bank who owns that asset and it would be good for the neighborhood not to have a vacant home. Nevertheless, the troubles caused by those that DO NOT live up to their commitments may far outweigh these benefits.

What do you think?