A bill before the U.S. Congress could stabilize the U.S. housing market by reducing the number of foreclosures for sale. Originally introduced in 2009 (but never voted on in the Senate), The Neighborhood Preservation Act would allow banks, as well as Fannie Mae and Freddie Mac agencies, to rent out repossessed (REO) properties to previous owners or other persons for 5-year terms.
The occupant will also have the option to purchase the rental at the end of the term. And it is hoped the bank will be able by then to sell at a higher price to recover more of their losses.
The bill might have a better chance of passing this time around. The “stakes are higher and there are much larger inventories of foreclosed properties in lender caches,” says Rachel LaMar, owner of brokerage firm LaMar Real Estate in San Diego. Elections are around the corner, too.
The bill could help the housing sector recover in other ways than by reducing the number of foreclosures presently for sale. Howard Dvorkin, founder of Consolidated Counseling Service Inc., points out that it “would add stability to communities because the homes would be maintained until housing prices begin to rebound.”
However, there are questions about the execution. For example, Wendy Herndon, a real estate agent with The Serena Group in Bradenton, Florida, says, “Given the way the banking industry and the government have handled the short sale and REO debacle to date, I personally have some reservations as to their capabilities … if this bill passes into law, I guess we’ll have to wait and see if they are better at being landlords.”