Solving the Foreclosure Crisis: Renting to Re-Own as an Option for Homeowners and Lenders

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As the foreclosure crisis in the United States continues to spiral, increasing attention is being given to novel and creative solutions for reducing the risk of mortgage default. The Obama administration has proposed several government-backed programs to help homeowners stay in their homes, and private lenders have tried various approaches to stabilize the economic situation. To date, none of the enacted efforts has substantially improved the crisis, and as such the number of homeowners filing for bankruptcy and entering foreclosure continues to mount. The present essay explores both conventional and creative options for reducing the risk of foreclosure. Historical, current, and proposed government and private industry- initiated…show more content…
Along with predatory lending practices and borrower insolvency, the real estate market has been flooded with an excess of available properties. This has resulted in an overall decline in property values and an increase in the likelihood of defaults among current homeowners who face having negative equity in their property (Quercia, Ding, & Ratcliffe, 2009).
Consequences of Foreclosure The effects of foreclosure are far reaching. For individual homeowners, the foreclosure process may lead to loss of self-esteem and emotional distress (Schultz, 2009). Personal credit is also greatly affected by foreclosure. Poor credit may lead to a borrower’s inability to secure adequate credit in the future. At best, borrowers may have limited options for credit including extremely high interest rates. Further, a poor credit rating may be viewed unfavorably by current and potential employers as well as property management companies. Individuals who have poor or high-risk credit may have limited opportunities for employment and could have property rental applications denied (Schultz, 2009). With respect to the physical properties, foreclosures often fall into disrepair and neglect causing blight upon the immediate and surrounding neighborhoods. Abandoned properties are known to attract crime and vandalism, which affects community appearances and lowers the value of surrounding properties (Harding, Rosenblatt & Yao, 2009). Further, homeowner’s valuation

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