No Foreclosure No Cry

“It is a fundamental right for every Californian to purchase and own a home and real property,” states the Foreclosure Modification Act, an initiative constitutional amendment proposed last week by a certain David Benson on behalf of all California homeowners.

The amendment would make homeownership a right, prohibiting lenders from foreclosing on any California citizen’s personal home. Lenders would instead be required to assist borrowers not paying on home loans due to financial hardship or illness—groundbreaking by today’s standards. Assistance would involve reducing home loan principals to reflect drops of more than 10 percent in local property values and rescheduling payments, reducing interest rates, and/or refinancing without new credit reviews. The amendment would also provide back property tax assistance to homeowners.

While, according to official analysis, some provisions of the proposed Foreclosure Modification Act may conflict with federal and state laws and regulations, and while its potential costs to California’s local and state governments make it an unlikely candidate for legislation in light of ongoing budget cuts, Mr. Benson is on to something.

The initiative amendment is based on the assertions that “[r]eal estate lending institutions have failed to provide a simple method of loan modification and foreclosure prevention” and that “foreclosure has become a method of increasing a lending institution, loan servicer, mortgagee, trustee and beneficiary’s bottom line and profits by turning borrowers out of their homes.” This language reflects citizens’ growing awareness that current policies go directly against the interests of the people and that the time is ripe for change.

Perhaps some legislators are coming around to this realization, as well. In April, Congressman Raúl M. Grijalva (D-AZ) introduced the Right to Rent Act of 2011 (H.R. 1548), an updated version of a bill he introduced in 2009 designed to prevent empty neighborhoods, displacement, and homelessness via foreclosure.

The bill allows a single-family homeowner who has resided in the home for at least two years—and purchased before 2007 at or below the median home price for that metropolitan area—to rent the home at fair market value for up to five years. The proposal requires no additional tax dollars or federal agencies and provides immediate relief for millions of homeowners facing foreclosure. In reality, the Right to Rent Act might serve the purposes for which the Foreclosure Modification Act was enacted, since it provides a relatively strong incentive for banks or other lenders to modify mortgages to avoid becoming landlords.

Even though alternatives to traditional homeownership deserve more attention as viable solutions to the United States’ so-called “housing crisis,” initiatives like the Foreclosure Modification and Right to Rent Acts represent some acknowledgement of the central importance of keeping Americans in their homes. An end to foreclosures and economically motivated evictions can be a significant stride toward the fulfillment of housing as a human right.