by Calculated Risk on 12/22/2009 11:28:00 PM

Two modification-renter related quotes: the first on modifications essentially turning homeowners into renters, and the second, a proposal from Dean Baker on making the renter-landlord relationship more formal.

From an article by Carolyn Said in the San Francisco Chronicle: 2009's mortgage modifications pretty minor

"The problem with affordability-only modification is that it essentially makes homeowners renters for the foreseeable future and locks them into their homes so they can't move elsewhere for better jobs." [said] Paul Leonard, director of the California office at the Center for Responsible Lending in Oakland.

Exactly. Any modification that leaves a homeowner deep underwater is really converting the homeowner into a renter. And eventually most of those modifications will fail.

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, suggest giving former homeowners the right to rent their home after foreclosure.
...
"If you give people the right to rent, it changes the logic from the lender's standpoint and makes foreclosure less attractive," he said. "Many lenders of their own volition will decide to work on loan modifications - otherwise they could be stuck with a renter for five to 10 years. It would shift the balance of power hugely in favor of the homeowner."

There is no good solution, but at least we are acknowledging that many "homeowners" are really renters.