Congress Passes Bill To Allow Foreclosure Rentals

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Last week congress passed a bill that will allow any bank that is registered with the FDIC to lease their bank owned properties back to the homeowner who was previously foreclosed upon.

This aims to alleviate two major problems facing our housing market today. The first being an over abundance of vacant properties with vacancy days ranging from 60 to 200 days, that lead to increased damages, thefts and trespassing. This also leads to the second major problem – while homes sit vacant, and cause an eye sore to neighborhoods they also decrease the value of the surrounding homes and areas, making our home valuations lower than they already are.

An increase in bank owned homes will mean that supply is greater than demand which will lead to lower home values, leaving current homeowners – those who are not in danger of foreclosure, with little to no equity left in their homes.

With congress passing the new bill last week, if you financed your home from an FDIC registered bank, they will soon have the option to allow the current homeowner (the one who is being foreclosed upon) to lease the property from the bank. The term of the lease can go up to five (5) years.

This option is available to those homeowners where banks acquired properties through foreclosure of deed in lieu. Rent to own options are also available to the owners in hopes of owning the same property again after a certain pre determined term. The rent to own option would only be available to those leases signed within the next 2 years.

With this new option banks are no longer faced with the grueling task of managing and holding a property on their books while it sits vacant waiting for a buyer to purchase the property. The banks philosophy here is that a property that is generating rent, whether it be for 2 years or 5years, is still better than a property sitting vacant.

Freddie Mac, which is government sponsored already allows their foreclosed homeowners to stay on a month to month rental basis. The long term lease option has not yet been made available to them.

This new act will help to solve many problems. Most importantly it will allow the homeowner to stay where they are, take care of their home and not have to go through the process of relocation. Ultimately what this plan hopes to achieve is a stabilization of market values. Those vacant homes that diminish the appeal of a neighborhood and decrease home values will now stay occupied. The lower the foreclosure rates the better for each neighborhood as well as valuation.

The act was passed last week by Congress and may take a few weeks for the full effect as well as rental option to hit the mainstream. A vast majority of banks are registered with the FDIC, Check with your lender if you are facing foreclosure to see if leasing is an option they would consider.

For more information about the latest South Florida foreclosures, news and updates check back with us weekly at http://www.gsigllc.com/