Lewis Ranieri, one of the co-inventors of the mortgage-backed security, says in a new letter to Congress that a national 'rent-to-own' program could help alleviate the national foreclosure crisis.
In a letter submitted to the House Financial Services Committee, Ranieri said a rent-to-own program managed through HUD and Treasury would help mortgage servicers in one key area: cash flow.
He is recommending that a government RTO would be "extremely beneficial to both troubled homeowners who cannot afford their current mortgage, and future homebuyers who find it difficult to come up with a down payment."
Under his plan, a renter makes market rate payments under the lease and when it expires has first right of refusal on a sale of the home. If the renter does not buy the home he can still share on some of the upside in the home's value.
Ranieri, who owns a specialty servicer in Texas, admits his plan does have limitations: it will require the U.S. government "to do something about other lien holders on the property."
