Duke suggests renting option could ease foreclosures, help housing market

Federal Reserve Governor Elizabeth Duke suggested Wednesday that banks should consider renting back to homeowners who've gone through foreclosure to help communities recover from the housing crash. 

"Homeownership, long promoted by federal policy and facilitated by local housing organizations, cannot and should not be the only alternative" for bank-owned property, Duke said Wednesday during a two-day summit on stabilizing the housing market. 

Some housing experts have suggested that banks could rent to homeowners struggling to make their rent payments, at market value, until they find new work or recover from an economic hardship and can restart paying their home loan.

There should be several redevelopment options for communities with high foreclosure rates, including "rental housing, lease-purchase and converting owners to renters to avoid vacancies," Duke said. 

"It is not sufficient, given current economic conditions and the significant needs of our neighborhoods, to do things the way we have always done them," she said. "Including rental options among the mix of stabilization strategies makes particular sense at a time of high unemployment."

Foreclosures increased nearly 4 percent in July to 325,229, a nearly 10 percent decrease from the same period in 2009. July was the 17th straight month that foreclosure activity exceeded 300,000, according to RealtyTrac, a firm that tracks foreclosures. 

Duke said while the housing market has experienced a high level of bad loans, unemployment and the nation's slowly recovering economy have sapped consumer confidence and are factors exacerbating the problem. 

"As delinquencies and foreclosures continue to grow, they will hinder the ability of communities to heal and ultimately to thrive,” Duke said.