Rent-Own: Solving The Foreclosure Crisis

However, hope might be on the horizon for the victims of the mortgage disaster of 2007/2008. Home buyers who were foreclosed upon years ago, or boomerang buyers, are beginning to be eligible to buy homes again. While some feel hope after feeling bamboozled by lenders and Fannie Mae and Freddie Mac, some feel anxious and fearful of the thought of buying again. Yet there are lessons that have been learned by the mortgage meltdown. Fannie Mae and Freddie Mac provided a lesson for the

An alternative would be for lenders to add a true customer service department which is not based on pay or get out, but is counseling based to keep Americans in the American Dream of home ownership. This would not only keep their customers for future business with new home loans, but would be noticed by neighbors and the community who are appreciative their home values are not decreasing. The lenders would counsel them through the sale by assisting them with getting the most they can for their home. By getting local community organizations involved to help with home repairs and curb appeal. Once the home is market ready and a dollar amount has been reached for these repairs the home owner will have to volunteer time and/or resources to assist another person going through the same situation. This would not only help the homeowner but will keep homes in the area selling at a fair market value and not bring down the values in their neighborhood. The assistance provided by the lenders and assistance from the community will help build their self confidence and make them feel like they are not alone.

The housing crisis of the late 2000s rocked the economy and changed the landscape of the real estate business for years to come. Decades of people purchasing houses unfordable houses and properties with lenient loans policies led to a collective housing bubble. When the banking system faltered and the economy wilted, interest rates were raised, mortgages increased, and people lost their jobs amidst the chaos. This all culminated in tens of thousands of American losing their houses to foreclosures and short sales, as they could no longer afford the mortgage payments on their homes. The United States entered a recession and homeownership no longer appeared to be a feasible goal as many questioned whether the country could continue to support a middle-class. Former home owners became renters and in some cases homeless as the American Dream was delayed with no foreseeable return. While the future of the economy looked bleak, conditions gradually improved. American citizens regained their jobs, the United States government bailed out the banking industry, and regulations were put in place to deter such events as the mortgage crash from ever taking place again. The path to homeowner ship has been forever altered, as loans in general are now more difficult to acquire and can be accompanied by a substantial down payment.

In 2008 the real estate market crashed because of the Graham-Leach-Bliley Act and Commodities Futures Modernization Act, which led to shady mortgage lending or “liar loans” (Hartman). The loans primarily approved for lower income and middle class borrowers with little income or no job income verification, which lead to many buyers purchasing homes they could not afford because everyone wants a piece of the American dream; homeownership. Because of “reckless lending to lower- and middle-income borrowers who could not afford to repay their loans many of the home buyers lost everything when the market collapsed” (Tankersley 3). Homeowners often continued to live in their houses for months or years without paying any

The Federal Housing Authority has put a similar plan together called the “Back to Work Program” which can help the buyer return to the housing market in as little as one year if the buyer is able to meet certain guidelines. The guidelines included in the “Back to Work Program” are: the buyer must pay their bills on time, had a 20 percent reduction in income, and a minimum credit score of 620. The “Back to Work Program”, has strict guidelines to make sure that the buyer is responsible, they must pay their bills on time and cannot miss one payment, or else they will be ineligible for the program. The 20 percent reduction in income must be demonstrated to be in the result of loss of employment and the reduction in income must be for a duration of 6 months. The Federal Housing Authority primarily requires the boomerang buyerthat is purchasing a home to have an hour long credit counseling session with the Department of Housing and Urban Development, after the session is completed a plan is created for the buyer.

Boomerang buyers who are returning to the housing market is great for the American economy. Former President Bill Clinton once said, “If you live long enough, you 'll make mistakes. But if you learn from them, you 'll be a better person. It 's how you handle adversity, not how it affects you. The main thing is never quit, never quit, never quit.” Boomerang buyers are the individuals that did not quit. Just seven years ago, these people lost their homes and most likely, ruined their credit at the same time. For those who are now in a position to buy a home again, it really says a lot about their character. The hope is that they have learned from their mistakes and are ready to take on the

I often used to watch a show called “Extreme Makeover” where a team of builders would come to a neighborhood, build a need worthy family a beautiful new home, and then just give it to them. “Wow! What a lucky family,” I would say. “How fortunate.” However, as time went by, that same family would be in the news again. Why? The house was in foreclosure. The people had gone to the bank and taken out a mortgage against the home, then spent all the money they got for it on other things.

potential homeowners to purchase their own homes. Loans that had at one point been impossible

The economic crash of the late 2000s severely affected my family. We moved to Spanish Fort, Alabama while the market was up in 2005; when the market crashed, we could no longer afford our mortgage and the house wasn’t worth nearly what we owed. My parents were forced to file bankruptcy after foreclosure notices, and we were forced to move- a huge financial lesson learned. As a result of my experiences, I rarely loan any money, avoid all credit cards, and am currently only in debt with my college education. Even with income cut in half by my mother’s recent disability, my family has bounced back, and it wasn’t nearly as hard as most people would expect. It just takes a little management. The market for “boomerang buyers” is astronomical, and the real estate business is a huge market to buy into. If done properly, depressions are the best times to buy real estate, and it’s an idea time for those who can’t purchase property to rent until they’re capable of excelling.

When the Stock Market crashed in the late 2000s, millions were forced to leave their homes by means of foreclosure. Now, after many hardships, the economy is on the rise; and the housing market is making a comeback. Its previous victims are beginning to recover and start fresh in this young economy. The low interest rates and surplus of homes have made the once expensive houses more affordable to those who are seeking to restart. Although these “boomerang buyers” are able to afford these homes, their past record of foreclosure has hurt their credit score which makes it difficult to acquire loans in this cautious market. However, there are several steps such people can take and many methods they can

Giving possible tenants the option to rent towards owing is a great way to get the housing market back on track. People who are struggling financially cannot afford to just buy a home. Allowing people the option to rent towards buying, takes some of the stress off the tenants and allows longer time to come up with the money, which means less people getting evicted or foreclosed on. The less people that are foreclosed on, the better the market for homes will be. Currently the market is great for anyone who is financially stable to purchase any home that has a foreclosure sign out front. If the option “rent-to-own” was made more available the people looking for homes, then it would allow them to save more money until they were financially stable to either buy the home, or move to another affordable location.

Following the 2006-2008 housing market crash, 4.8 million of homeowners lost their most valuable assessment to foreclosure, and another 2.8 milliongave up their homes in short sales. These former homeowners that are reentering the housing market after losing their homes during the housing market financial crisis are now part of a wave of “boomerang buyers.” According to Real Estate experts, boomerang buyers who are returning to the market were at least 10 percent of all United States home purchases during 2014. More important, this trend is expected to increase in 2015 and 2016 as more boomerang buyers become eligible for new options to get their dream homes again. The unquestionable fact is that a great majority of boomerang buyers are hardworking, honest people that got caught in the middle of one of the biggest housing crisis that occurred in the last 100 years. Fortunately, those housing crisis’ victims are beginning to see the light at the end of the tunnel since several options are becoming available to them in order to get back into home ownership. Among these options, I like to explore some available avenues for those boomerang borrowers to include the rent to own option, Veterans Affairs backed loans, and owners financing option.

The current housing market while not quite as oversupplied as during 2007-2009 is still leaning in that direction in some parts of the country. This means that there are those who have mortgages on homes that they would like to keep but are overextended on. These homeowners would be likely candidates for the “Boomerang Buyers” to approach and suggest the idea of a rent-to-own arrangement. Research needs to be done to determine if the

A recession is full-proof sign of declined activity within the economic environment. Many economists generally define the attributes of a recession are two consecutive quarters with declining GDP. Many factors contribute to an economy's fall into a recession, but the major cause argued is inflation. As individuals or even businesses try to cut costs and spending this causes GDP to decline, unemployment rate can rise due to less spending which can be one of the combined factors when an economy falls into a recession. Inflation is the general rise in prices of goods and services over a period of time. Inflation can happen for reasons such as higher energy and production costs and that includes governmental debt.

Banks now offer programs to help homeowners/homebuyers, but many times, these loans are often hard to obtain. The current programs have more stringent requirements that are unreasonable for distressed homeowners. In my opinion, the only way to rectify the foreclosure issue is to make a substantial change in how potential homebuyers and homeowners obtain loans.