Housing & Mortgages

Our country is facing a truly historic foreclosure crisis. The scale of the problem is deep and wide. The mortgage crisis has already caused a devastating ripple effect in our economy, and threatens to  tear apart the families, neighborhoods and communities that are the social fabric of this great nation.

The Scope of The Problem

This crisis affects the entire nation, but the worst impacts have been concentrated in a small number of states that unfortunately includes Arizona. Arizona is reported to be in the top five states for both foreclosures and “underwater” mortgages, in which the amount owed is greater than the assessed value of the home. Nearly a third of Arizona mortgages are reportedly underwater, and when the foreclosure problem is added, a shocking number of Arizona homes are affected.

Nationally, a record 3.9 million homes were foreclosed in 2009, and knowledgeable observers estimate that the official number for 2010 could surpass 4.5 million. It is hard to overstate the gravity of this problem.

Rep. Grijalva feels very strongly that the remedies proposed and enacted by the federal government have been inadequate compared to the scope of the problem. Problems with the Home Affordable Modification Program (HAMP) have been widely reported and are well known to those who have sought help. The Treasury Department found that by the end of January 2010, only 116,000 mortgage modifications had been made permanent under HAMP. “Too little, too late,” is an appropriate summary of the effort so far.

At the same time, he is upset to see many culpable bankers -- whose toxic assets were based on troubled mortgages -- receive obscenely lavish subsidies from the TARP program. Those financial resources could have been more sensibly used to purchase troubled mortgages, which the government could refinance on humane and affordable terms. This deliberate choice to address the Wall Street financial crisis, rather than the Main Street mortgage crisis at its root, will in his opinion be remembered as a massive, unnecessary blunder.

Legislation

Because this is an extraordinary situation, and the actual and potential consequences are so grave, he has proposed a remedy that would keep families in their homes, keep communities whole, and provide a very, very strong incentive for mortgage lenders to refinance on affordable terms.

The idea is called "Right to Rent,” (R2R) and it was introduced in the form of HR 1548, “The Right to Rent Act of 2011." R2R would grant foreclosed homeowners the option to remain in the home as renters, and pay a fair market rent. The rent would be set by a court-appointed appraiser and adjusted annually for inflation. To prevent abuse by speculators, the Act limits eligibility to mortgages on single-family, principal residences, occupied for at least 2 years, which were purchased for less than the median home value in the metropolitan statistical area in which the home resides or the median value in the state if such information is not available.

R2R has been tried by Fannie Mae on a voluntary trial basis, and is gaining recognition as an idea whose time has come. HR 1548 would implement this program nationally and give homeowners important leverage in dealing with threats of foreclosure. R2R would provide families with housing security if they opt to rent, and would likely result in many of these families remaining in their houses as homeowners. Banks will have a strong incentive to negotiate new terms on mortgages in order to avoid becoming landlords.

R2R is one of the few proposed remedies for the current mortgage crisis which requires no expenditure of federal funds or additional bureaucracy. It gives immediate relief to millions of families facing foreclosure and prevents home vacancies that harm neighborhoods. It will help prevent a spiral of vacancy, neglect, blight, and eventually lowered property values for those neighbors who managed to keep their homes.