One last point: "Rent" is not a four-letter word
Judging by a few of the comments, however, I think I need to elaborate on one point: I understand that foreclosure can be a traumatic experience. And I am not suggesting that anyone who loses his or her home to foreclosure just be thrown out on the street, given no aid whatsoever, and be forced to live under a bridge. What we do need to do, however, is focus less on keeping people in unaffordable, purchased homes encumbered by an unsustainable debt burden -- and more on just ensuring people have shelter, even if that shelter is RENTED shelter.
For some reason, RENT became a four-letter word in recent years. That shouldn't be the case. There is nothing wrong with renting a house, condo, or apartment, if you can't afford to buy -- or can't afford to stay in your home because you have a mortgage that is killing you, or that is secured by an asset whose value has plunged. Perhaps instead of providing huge subsidies to the mortgage industry, we should consider directing money toward making the transition into more affordable rental housing easier. Just a thought off the top of my head, but we could provide a Housing Opportunity Voucher that would cover the cost of first month's rent, last month's rent, and security deposit for people who lose their homes to foreclosure, but don't have enough money to cover the initial costs associated with finding rental shelter.
Stated another way, the reality that often gets obscured in this debate is that people who lose their OWNED homes have plenty of housing alternatives. We are not a country that's starved of housing units, be they single-family properties, condos, or apartments. And we are not in a market where former borrowers are going to have to pay through the eyeballs to get a new place.
Just consider: The nationwide rental vacancy rate was 10.1% in the fourth quarter of 2008, up from 9.6% a year earlier and just shy of the 2004 high of 10.4%. That level was the highest in the 49 years the Census Bureau has been tracking the data. Figures from the National Multi-Housing Council's confirm the rental market is extremely soft. The NMHC's market tightness index came in at a paltry 11 in the January survey, down from 24 a quarter earlier and the lowest in seven years.
Bottom line: Former homeowners should have no trouble finding rental space at great rates. In the meantime, for those who can't, we could re-direct more money from mortgage subsidies to programs that strengthen our nation's safety net (unemployment insurance, rental vouchers, funding for community groups that feed, clothe, and shelter the homeless, and so on).