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Banks Want To Rent You A Foreclosure Home
Banks Created The Foreclosure Mess:
Now They Want To Profit From Renting
Distressed Houses
December 30, 2011

The major banks have thrown their hats into the housing rental ring. Earlier this year the
Obama Administration proposed renting the thousands of foreclosure houses across the
nation. The Administration asked the public and the professionals for ideas to help manage a
program that would turn about 180,000 foreclosures into rental properties. The banks were
quick to put forth several ideas which could see them becoming major landlords.

Let's examine the issue. The banks contributed to the housing crisis by underwriting bad
loans. They then wrongly foreclosed on thousands of American families. Now they are
proposing renting the same foreclosed houses to the very same people that they made
homeless.

Fair housing advocates are asking the Obama Administration to reject all proposals from the
banks, or at the very least limit their involvement. Bloomberg reported that over 4,000
companies, organizations and individuals submitted proposals. Only 400 of the proposals
were considered valid.

One of the interesting proposals received by the federal government was from Fortress
Investment Group, LLC. Fortress Investment Group is a private equity firm headed by the
former CEO of Fannie Mae, Daniel Mudd. Earlier this month Mr. Mudd was formally charged
and sued by the SEC for wrongdoings while he was running Fannie Mae. The lawsuit claimed
that Mr. Mudd lied about the amount of risk that Fannie Mae was exposed to during the
housing boom. The issue we are faced with is whether it is legally okay for a person or
company to profit from a situation that they in fact created.

Making the right decision is critical to the success of the program. If banks, equity firms and
other wealthy investors are able to buy large number of houses and then dump them on the
market at heavily discounted prices, this action could further erode the housing market.
Neighborhoods and families across America could see their house values plummet.

The Pew Research Center said in a recent report that properties in white neighborhoods were
being better maintained than those in ethnic communities. This doesn't sit well with most
Americans since the banks and property management companies are being paid by the
federal government to upkeep the vacant houses and rid the neighborhood of the eyesores
that foreclosures bring.

African-American and Latino families are more prone to a huge drop in house prices. Many
from these two communities have already been victimized by bad, expensive mortgages and
predatory lending. Median income among African-Americans has fallen to a 30 year low.
Because of the steep drop in home prices many minorities can not refinance their mortgages
and use the money to send their children to college. This foreseeable result of no college
education is another generation mired in poverty and crime.

Many community leaders would like to see the Obama Administration look at non-profit
organizations and get their input. They feel that these types of organizations are closer to the
homeowners, and that they would have a better sense of what is better for the neighborhood.

This is an opportunity for the Obama Administration to correct some of the problems caused
by the housing crisis.