Representative Raul Grijalva (D-AZ) introduced the “Right to Rent Act of 2011” on April 14 with 13 co-sponsors. If enacted, the bill would allow homeowners in foreclosure to remain in their homes as renters. This is a reintroduction by Mr. Grijalva of his 2010 bill. The legislation would provide mortgagors of one-to-four unit buildings and condominium and cooperative units that are in foreclosure the option of remaining in their homes for five years as tenants.
The former owner, now renter, would be charged a fair market rent as determined by an independent appraiser who is licensed or certified to conduct appraisals in the property’s jurisdiction. Once the rent is set, it would be adjusted each year by the “owners’ equivalent rent of primary residence” component of the Consumer Price Index. The bill explicitly states that the transition to a lease under the program would not hinder a foreclosure or the right of the tenant to pursue a reinstatement of the mortgage.
To be eligible, a property would have to have had a purchase price less than the current median purchase price for residences that are located in the same metropolitan statistical area (or the same state if the home is outside the state’s metropolitan areas) and a loan that originated before July 1, 2007. The new owner of the property, which would initially be the bank, would be able to terminate the tenancy for material breach, and the former owner must use the property as a principal residence during the period of the lease. The landlord-tenant relationship would be governed by local landlord-tenant laws.
Implementation and compliance with the provisions of the bill would be overseen by the Office the Inspector General at HUD and the provisions of the bill would have a sunset of five years after enactment.
The bill was referred to the House Committee on Financial Services.