Hurry Up and Foreclose So We Can Bulldoze or Rent or Blight Neighborhoods

This post on Credit Slips is a little bit maddening to me–the subject matter, not the author’s take.  Apparently, federal housing agencies are soliciting ideas for getting rid of large-scale “inventory”(people’s homes).  The only thing they don’t really consider is finding ways not to foreclose in the first place.  Here’s an excerpt:

So it is worth coming up with new ideas, even if belatedly, or recycling old ones, and some are excited at the prospect.  Mortgage News Daily, for example, has relentlessly covered ideas for using foreclosed homes to bring down prices in the rental market, including rentals to “previous homeowners.”  (Comment:  What about keeping them in their homes in the first place, perhaps as renters, which those without equity effectively are, but at more affordable rates?  See here for such a proposal, but since it depends on congressional action, forget about it.   . . .

Efforts to put foreclosed properties to good use could be swamped if we don’t also direct more energy to stemming the tide of inventory, a euphemism for what is left after people are tossed out of their homes.  Specifically, it would be nice to see foreclosure prevention linked in the government policy mill to the problem of dealing with foreclosed property.  Seemingly lost in the shuffle is the irony of focusing on large-scale transactions to rent foreclosed properties, to a market that includes their former owners.  Sure, FHFA could implement a program of large transactions in sales of foreclosed homes without congressional action.  But it could also act on its own to implement proposals to have the GSEs modify loans or convert loans to rentals, keeping people in the same homes under different terms while also reducing relocation and transaction costs and emotional toll.  Not all foreclosures can be prevented, but FHFA has done far too little to reduce the inventory problem by keeping properties from becoming foreclosed inventory in the first place.

Couldn’t have said it better…


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