Entries in Rentals (4)


'Failed' Housing Programs: How Will Rental Market Benefit?

Creatas/Thinkstock(NEW YORK) -- Federal efforts to help struggling homeowners are not working, and instead it’s the owners of rental properties who are benefiting, said Gary Shilling, one of the economists who predicted the subprime mortgage crisis.

Shilling forecasts that rentals will continue to provide “attractive returns” for years to come, while the housing market continues to flounder.

In an opinion piece for Bloomberg, Shilling, the president of A. Gary Shilling & Co. and author of The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation, critiques three federal housing programs, charging “the administration hasn’t given up on its failed attempts to aid housing.”

He wrote in the third of a three-part opinion series for Bloomberg that Fannie Mae’s Home Affordable Modification Program (HAMP) is “hopeless.”

“The administration initially said this program would relieve 3 million to 4 million distressed homeowners, but it’s been a miserable failure,” he wrote.

That program, created by the Financial Stability Act of 2009, was intended to lower monthly mortgage payments for homeowners who have a financial hardship and are delinquent or in danger of falling behind.  The lower payments are calculated at 31 percent of the homeowners’ verified pre-tax income.

Shilling writes that through December 2011, 1.8 million HAMP trial modifications had been initiated, but the monthly pace of new modifications is dropping continually.  Shilling is also critical that only 43 percent of the HAMP trial modifications, or 762,839, made it to permanent status.

“Nevertheless, the administration still has hope for the program and has extended it through December 2012,” Shilling writes.

However, the Department of Housing and Urban Development’s (HUD) January scorecard indicates that more than 930,000 homeowners have received a HAMP permanent modification to date, saving an estimated $10.5 billion in monthly mortgage payments.

After six months in the program, more than 94 percent of homeowners remain in their permanent modification, the report states.  The scorecard also reports that 84 percent of homeowners entering HAMP in the past 18 months received a permanent modification, with an average trial period.

Whether or not the federal housing program is helping enough homeowners, rental prices continue to edge up.  The rent component of the consumer price index is rising, up 0.2 percent from January, and up by 2.4 percent from 12 months ago, the Bureau of Labor Statistics reported Feb. 17.

Copyright 2012 ABC News Radio


Enterprise Rent-A-Car Blinks in Battle with California Mom

Joe Raedle/Getty Images(NEW YORK) -- Under pressure from a mother who lost her daughters in the crash of a recalled rental car, the nation's biggest car rental company said Thursday it had changed its stance and would back a new federal law banning the rental of cars recalled because of safety risks.

"In the past we believed that this step was unnecessary," said Laura Bryant, a spokeswoman for Enterprise Holdings, "but a growing number of people, including our customers and business partners, clearly want more assurance on this critical issue. We hear them -- and what we've heard has caused us to rethink our stance."

The announcement came after Cally Houck, whose daughters died in a recalled car rented from Enterprise, launched a petition drive earlier this week calling on Enterprise to drop its opposition to the law. By Thursday, according to, the organization hosting the petition online, more than 100,000 people had signed the petition.

Houck said she had started the signature drive "to keep this from happening to another family and to be sure that my daughters' memory is preserved." She alleged that Enterprise both opposed the bill and had lobbied against it. Bryant confirmed that Enterprise had opposed the bill, but did not address whether the company had worked against it.

Hertz, the nation's second-largest rental car company, announced earlier this week that it had reached a deal with a consumer safety group to support federal oversight of rental car recalls. A spokesman for Avis, the third-largest company, told ABC News it was "currently reviewing and discussing the Hertz proposal."

While Enterprise had said as recently as Wednesday afternoon that it opposed the new law, proposed by Sens. Barbara Boxer, D-Calif., and Charles Schumer, D-N.Y., Bryant said Thursday afternoon that Enterprise was "announcing its formal support for federal legislation to oversee the way car rental companies manage the safety recall process for vehicles in their fleets."

The nation's rental car companies together own more than 1.5 million vehicles, with hundreds of thousands subject to recall in any given year. The law proposed by Sen. Boxer and Sen. Schumer would stop care rental firms from renting out cars that are subject to federal safety recalls until after they are fixed. The senators attached the law as an amendment to a transportation bill that is up for vote in Congress later this month.

As featured in a 2010 ABC News report, Houck's two daughters, 24-year-old Raechel and 20-year-old Jacquie, were killed in 2004 when the Chrysler PT Cruiser they rented from Enterprise apparently began leaking steering fluid and suddenly caught fire before crashing into an oncoming semi-tractor trailer. The car had been under a safety recall for the potential fire hazard, but was still rented to the sisters. The Houck family sued Enterprise, and after a lengthy legal fight, the company admitted negligence and was required to pay $15 million in damages to the family. After the ABC News report, the National Highway Traffic Safety Administration launched an investigation to see how quickly rental car companies repair vehicles that have been recalled.

Before announcing that Enterprise had decided to support the law, spokeswoman Laura Bryant had said the Houck accident was a "terrible tragedy," and that customer safety was Enterprise's "top priority," but that the company didn't believe legislation was necessary.

"[A] number of respected individuals, including elected officials and regulators, [believe] additional oversight of the recall process may be needed," said Bryant Wednesday. "While we believe this well-meaning legislation is unnecessary and based on inaccurate, obsolete data, our company continues to work with these individuals and organizations -- including NHTSA and the auto manufacturers -- to find common ground and produce a solution that addresses everyone's concerns."

Copyright 2012 ABC News Radio


Investors Turn Foreclosed Homes into Affordable Rentals

ABC News (WASHINGTON) -- Turning foreclosures into rentals: Could this be a solution to the foreclosure crisis in America?

On Wednesday, the Obama administration announced it is soliciting ideas for ways to turn a half million foreclosed homes into affordable rental properties.

The Home Affordable Modification Program hopes it can be the ticket to boosting falling home prices and transforming thousands of government-owned foreclosures into homes with families.

Officials say they'll be listening for ideas until Sept 15.

Dayne Francis, an investor in Atlanta, said he has plenty to share. He and his family have bought eight foreclosed homes already this year for pennies on the dollar and transformed them into rentals. In June, they bought their latest foreclosure for $22,000. After $15,000 in upgrades, they expect to have the home rented to a family next week.

His sister-in-law, Candis Francis, the realtor of the family, said the family would buy up even more foreclosures, but getting loans is tough, and they usually pay cash. With better access to credit, she said, more investors would put "more skin in the game."

"If the government would get involved and offer more affordable finance options for investors, it will make things a lot easier," she said.

Dayne Francis, who runs the money end of the business, told us these new ideas "would probably take 50 to 75 percent of the properties off the market within a year or two, tops."

In addition to easier financing, experts say, the government could help by tweaking a few rules -- giving tax breaks to investors who can't collect enough in rent to pay the mortgage on their newly purchased foreclosed home.

There's talk of encouraging more investors to buy the homes of distressed families, allowing the family to remain in the home and charging them an affordable rent.

It worked for JR Klimach and his partner, John McKay.

They were struggling to pay an $1,100 mortgage. Then, an investor stepped in, paid cash for their home, and charged them $850 a month in rent.

Their investor, Rob Davidson, said that the foreclosure-to-rental solution is more than a smart economic decision.

"We've helped a lot of families," Davidson said. "You can't put a dollar value on what it does inside for you."

Someday, he'll make his money when he sells the home, he said, and he hopes to sell it back to Klimach and McKay.

However, critics worry the seemingly good ideas could lead to more absentee landlords who buy distressed homes and leave them in despair.

Nevertheless, some experts, including Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and a former chief economist to Vice President Joe Biden, said the solution could have a huge immediate impact on blighted neighborhoods.

"I wouldn't bet that this program is going to lead to big changes right away in national housing prices," said Bernstein. "But I do think that it will help in neighborhoods, particularly those with high concentration of foreclosed homes. If you could move some of those foreclosed properties off the residential market and into the rental market, that should slow the decline in housing prices in those areas."

Copyright 2011 ABC News Radio


Now Playing: Movies on Walmart's Website

Justin Sullivan/Getty Images(BENTONVILLE, Ark.) -- The country’s biggest retailer is jumping into the growing market for streaming videos. Walmart on Tuesday announced it will begin offering movie rentals to online customers for as cheap as one dollar each.

“By incorporating digital movie content into the entertainment shopping experience, we're enabling customers to easily choose how they want to enjoy their entertainment content – whether that be through a physical DVD, digital streaming or both,” said Edward Lichty at movie streaming service VUDU, a Walmart subsidiary.

Walmart joins an increasingly crowded field of movie download competitors, including Hulu, Apple TV, Netflix, and local cable providers. 

Copyright 2011 ABC News Radio

ABC News Radio