Newly Unveiled Housing Affordability and Stability Plan Doesn’t Help Renters

By Anuradha Kher, Online News EditorWashington, D.C.–President Obama’s newly unveiled  $75 billion Housing Affordability and Stability Plan, which is aimed at avoiding foreclosures, may be the much needed relief for many individuals on the brink of losing their homes. While it was praised by some housing groups, others said the plan isn’t the best course of action the economy needs right now.Conrad Egan, president and CEO of the National Housing Conference, commended the Admininstration for its “ambitious multi-pronged approach” to address the foreclosure crisis. He said the plan could likely head off millions of foreclosures. “In particular, by offering incentives to servicers to lower monthly mortgage payments to a level that homeowners can afford, and allowing others who owe more than their house is worth the ability to refinance, millions of responsible homeowners will have the opportunity to stabilize their families and communities.”Egan also praised the proposal to ensure the liquidity of Fannie Mae and Freddie Mac. The measures would help build a stronger housing market in the near-term and increase housing affordability in the long-term, he says.”We look forward to working with the Administration and Congress on the implementation of these and other measures that are focused on confronting the nation’s housing crisis,” Egan says. On the other hand, the National Low Income Housing Coalition (NLIHC), says the plan does not appear to provide relief for renters who are losing their homes because their landlords have been foreclosed upon. “Approximately 40 percent of the households who face eviction because of foreclosure are renters. In most states, renters’ tenancy is terminated automatically at foreclosure of a property. In many states, there is no requirement that tenants even be notified of foreclosure,” NLIHC says in a statement. The NLIHC and other advocates for low income renters have urged the establishment of federal protections for renters that will require the entity that takes possession of a renter-occupied property at foreclosure to honor the existing lease or provide a minimum of 90 days’ notice for the tenant to vacate the property.  “Renters are the least blameworthy of all the victims of the foreclosure crisis,” says NLIHC President Sheila Crowley. “It is unconscionable that someone who has been a lease-abiding tenant, paying the rent on time, be evicted with little or no notice because the landlord has defaulted on the mortgage. It also does not make sense to get rid of a tenant who provides an income stream for the new owner and prevents a property from sitting vacant. An occupied house with a good tenant is far preferable to an unoccupied house for both the new owner and the surrounding neighborhood.” “We urge Treasury Secretary Geithner to use his authority to require all institutions that receive TARP funds at a minimum to honor the leases of existing tenants in properties they acquire through foreclosure,” Crowley says. “A great deal of harm to innocent families could be prevented if he acted now.”John Berlau, director of CEI’s Center for Investors and Entrepreneurs believes the plan continues the misguided efforts of the Bush administration and Congress to “keep people in their homes” at all costs. “Such policies only end up disserving taxpayers, the economy and troubled borrowers themselves,” he says.According to Berlau, foreclosures are difficult, but are sometimes the least bad option for an individual borrower. “They allow borrowers to walk away from both the home and the loan, at a cost to their credit rating, but not nearly as big a hit as they would take if they declared a personal bankruptcy,” he says. “Whatever the cause of the homeowners’ troubles, the focus should not be primarily on keeping people in their homes but on opportunities to improve their economic situation, such as relocating to areas experiencing job growth. If the government wants to spend $75 billion to help troubled homeowners, it would be better off giving a tax holiday to families subject to foreclosure, rather than attempt to stop the foreclosure from occurring that often have unintended consequences,” adds Berlau.According to him, Democrats and Republicans should focus on the truly “progressive” goal of helping victims of the financial crisis improve their economic situation, rather than ambitious efforts to keep people in their homes that can often lead to negative consequences for taxpayers, mobility in the economy and borrowers themselves. Meanwhile, the Local Initiatives Support Corp. (LISC) believes this plan will give some homeowners the chance to refinance their mortgages and reduce their payments, and in doing so should offer more certainty to lenders/servicers eager to stabilize their portfolios. “The best news in this package is that we are finally tackling our housing problem straight-on in a thoughtful, serious way,” says Michael Rubinger, president and CEO of the LISC. “This is something we haven’t had thus far, a plan that goes to the root of the current economic crisis. “Certainly, the President’s proposal cannot alone solve all the financial challenges that we face today. But, it is an important, positive step toward alleviating some of the debilitating pressure facing families and communities in this environment,” he says.”