LawsonGroupMediation

During the last week of July, congress passed legislation expanding a program aimed at allowing homeowners to rent the homes post-foreclosure.  The lenders prefer foreclosure over short sales (see prior blogs), so they will be strongly promoting this program as an alternative for homeowners.

What they will fail to emphasize, or perhaps even disclose to the homeowners, is that they still will have a foreclosure on their credit report.  More importantly, since applications for new loans must meet Fannie/Freddie standards, they will be asked if they have ever had a foreclosure or a deed-in-lieu.  The result is worse than the negative credit impact, and may prohibit these homeowners from puchasing a new home in the future, perhaps even for the rest of their lives!

In addition, even if they do not care about the negative impact on their possible future purchase possibilities, landlords may often rent to homeowners who go through foreclosure, however, since the banks most likely will not provide a credit reference, landlords might not rent to them after renting from the lender who will not provide a credit reference.

It is vital, when discussing with homeowners the alternatives, that you help them to understand that congress really did not do them any favors in this legislation.  This legislation will help some homeowners in low income housing who do not need credit references to rent slum-housing….er low income housing.

Ken Lawson, JD

TheLawsonGroup Mediation Services

www.LawsonGroupMediation.com