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Can Foreclosed Homeowners Stay In Their Homes?

It is called The Neighborhood Preservation Act and if passed into law, may provide foreclosed homeowners a way to stay in their homes.  The idea is pretty straightforward.  The government will allow banks to lease back homes to foreclosed homeowners for a period of up to five years.  There is also a provision that would provide the foreclosed homeowner the option to buy back their home at the end of the lease.  There are still a lot of questions that we simply do not have answers to at this time.  For example, how much would the monthly rent be and who would determine that?  What amount would the house be purchased back for at the end of the lease?  From what we can conclude at Christian Money, it appears that much of this will be left up to the bank to decide.  There is no provision that would require any bank to go along with this plan, the law would simply allow for such an arrangement to take place.  The bill has only passed the House and must still pass the Senate and be signed by the president.

Another issue that would have to be tackled is how this type of transaction would affect a bank’s balance sheet.  How would a portfolio of rented homes be listed on a bank’s financial statement?  What infrastructure would have to be created for a bank to become a landlord?  Many homes that are foreclosed are not well maintained.  Do you pick up the phone and call your bank to fix a leaky sink?  Who is responsible for other more serious repairs, such as the roof?  Who pays the insurance and taxes each year?  These are just a few of the questions we have at Christian Money and we are just beginning to examine the issue.

It does appear to be one of the first practical solutions we have seen to the foreclosure crisis.  After all, a neighborhood with several empty houses is not good for anyone.  Allowing people to stay in their homes and have a shot at buying it back all sounds like a good concept.  As they say, the devil is always in the details.  It is likely that we won’t hear much more about this for a few weeks as Congress is in recess and will have to grapple with the healthcare issue when they return in September.

The optimist in me sincerely hopes that this latest program will provide some real help to homeowners in trouble.   

Helping you make the most of God’s money!

James L. Paris
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