Posted on Friday, September 25, 2009
Proposals pending in Florida, one of the hardest hit states, reflect the problem at the foundation of our crisis; Who should be responsible for bad buying and lending decisions? How should we allocate the risk of bad decisions?
The third proposal relates to rental properties. This one would give tenants with at least a 1 year rental history the right of first refusal to buy the property from the lender who foreclosed. OK so far. BUT it would also require the lender to use any funds it has in escrow for closing costs or, if the tenant does not buy the property, to give to the tenant to relocate. That I don't get. A lender who is out hundreds of thousands of dollars on a foreclosure now has to hand over money to help the tenant move? Lenders who don't comply could face stiff costs but the tenant only has 90 days to bring a claim.
Making the bank resopnsible for the borrower-landlord actions is RIDICULOUS. Why not require landlords to disclose foreclosure risks in their leases, legally obligate them to notify their own tenants of a foreclosure, and create stiff fines for borrower-landlords who collect rents but don't pay their mortgage (hundreds of millions of dollars in rents are being collected by borrower-landlords as we speak, who are then pocketing them money instead of paying their mortgages. I know some who ever brag about it!!!!). And what about the security deposits? Florids statute provides how they are to be held, but how about some proposals for better safe keeping and stiffer fines for violations?
We'll definitely see lenders tightening their requiresments and raising the costs for loans on income property for ALL OF US. Again we're allocating the risks and punishing the wrong people.