What About the Renters?

Once again the government is seeking to bail out homeowners. They are seeking to continue propping up artificial home prices that can no longer be supported by the economy instead of stepping back and letting the housing market go through its normal cycle. I understand those that are terrified of a natural cycle housing market because they bought into the hype that over-inflated property values and made them prime investments. The fear of losing everything is strong, but the chance of never recovering is stronger unless the government stays out of it.

The billions of dollars spent on the mortgage industry to cover the backsides of banks, mortgage companies, and homeowners has for the most part helped less than a half million individuals; all of this money flowing into the housing market and nothing for the renters. Making the rent is just as important as making the mortgage payment. If a mortgage is foreclosed upon there is time for the residents to make other arrangements for their families whereas an eviction for non-payment of rent results in an immediate outing and no way to get moved in less than twenty-four hours. Landlords have mortgage payments to meet themselves and are not inclined to work with tenants that may have problems making the rent for a month or two. So while the government is bailing out homeowners, financially injured renters are becoming homeless a fact supported by an increase of 24% since the beginning of the year.

In many states a reasonable mortgage is cheaper than rent even with interest and insurance. Throw into the fact that there are a massive amount of homes available for under $30k that do not qualify for mortgage loans because they will not make the mortgage holders enough money. Where is the bailout to help renters purchase the inexpensive homes in older and rural areas? These same people that are paying $600 to $1200 a month rent for places to live can afford a $350 mortgage payment but may be lacking the credit scores and down payments necessary for any type of traditional mortgage; not to mention the people that may have the credit score and down payment for a small mortgage but cannot find anyone who will offer financing on homes below the $50k mark. Most mortgage companies and banks will not finance anything under $77,000.

Of course, there are always the people who say just put it on a credit card. It doesn’t work that way. Often renters are living paycheck to paycheck. They are making the bills but do not have enough left over to set aside for a down payment. These same people may have once had acceptable credit scores but because of reversal of jobs, pay cuts, medical emergencies, or a multitude of other life happenings may have seen dramatic drops in their credit scores. These factors do not mean that they cannot make a mortgage payment, just that they cannot get their foot in the door. So where is the help for these people?

Considering all of the homes that are sitting empty enduring non-existent maintenance, vandalism, squatting, and any other variety of harms wouldn’t it make sense to come up with a program that allows renters to purchase these homes in a reasonable fashion rather than to just lose the investment? I do realize that the first thing some people with think is these are the people that caused the crash to begin with using sub-prime mortgages. Renters are not the guilty parties for the crash resulting from the sub-prime fiasco. Most renters could not even get a sub-prime loan to begin with. Sub-prime mortgages were issued to people using stolen social security numbers, people claiming greater incomes than were verifiable, and people using 80% of their income for their mortgage payment by lenders that were interested in the bottom dollar. Sub-prime lenders further damaged the industry by allowing “liars” loans and by not performing due diligence. Most renters are honest and hard working and did not consider lying about their income or credit leaving them out of the sub-prime market altogether.

A program needs to be developed for renters that would like to own a home but can’t afford an outrageous mortgage or simply do not desire a large monthly payment. These renters are the people that can turn the tides within the housing industry if given the opportunity and an open door to do so. These are also the people that work at the less than living wages, sometimes multiple jobs, to make sure that their bills are kept and their families are fed. A lack of credit score due to uncontrollable means and a lack of down payment does not make someone a bad risk. The chance to own a home for many renters would make them more loyal to the company that financed them and more than willing to go the extra mile to insure that the mortgage payment is made every month. Wouldn’t it be better to have a whole bunch of little mortgages on the rolls paying like clockwork that have a whole bunch of big mortgages that are defaulting and paying only some of the time?

Maybe the government should stop trying to fix what can’t be fixed and considering spending the money that they are so determined to spend on something that has the potential to help the economy in the long run.