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August 8th, 2008

Tenants — Victims of Foreclosures, Landlords, or Lenders?



Calculated Risk discusses an article in today’s Washington Post of tenants forced out of their homes because their rental property has been foreclosed.

Calculated Risk took a different approach and wants to know, “how you can have so many foreclosures of cash-flowing rental properties”:

  • The purchase price of the property was simply nonsensical for an investment property, given market rents. Even though the tenants are paying, the rental payment is significantly less than the carrying costs of the property…
  • The property was never intended to be a rental property in the first place.
  • The tenant is paying rent, but nowhere near what the market would support.
  • The owner is simply skimming rents.

This post makes an interesting suggestion to news outlets — instead of reporting about the victims of the “foreclosure crisis,” they should focus on the ramifications of poor lending, the effects of the housing boom coming to an end, and/or the fraud being committed by landlords:

That may not mean much to the tenants involved, but it would help for public policy reasons to stop thinking of foreclosure as the “cause” of these disruptions rather than the inevitable result of such “malinvestment.”

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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