Free Rent: $2.6 Billion Per Month

November 1, 2010 No Comments »

free rent

Interesting tidbit from the Wall Street Journal.

Defaulters who continue to live in their homes are getting a “subsidy” worth a collective $2.6 billion each month, according to data from LPS Applied Analytics and rent data from the Commerce Department.

And the longer they stay, the greater the stimulus.

Per LPS data, the average borrower whose home is in foreclosure hasn’t made a payment for 16 months, meaning plenty of free rent.

The recent robosigner controversy may have extended that period of free rent for some, while making matters worse for the banks that eventually wind up with the properties.

The benefit is greatest in hard-hit states like California and Florida, where about $500 million in stimulus goes to defaulters each month.

And these millions of homeowners who have stopped making mortgage payments may be stimulating the economy by using that money to buy consumers goods and services.

Some are even socking away that money in the hopes of receiving a loan modification from their bank or mortgage lender, or renting out the homes while waiting for banks to foreclose.

It is estimated that as of September, banks owned nearly a million homes, a 21 percent increase from a year earlier.

That supply would take an estimated 17 months to clear at the current sales pace, and doesn’t include the 5.2 million other homes still in the foreclosure process or at least two months in default (shadow inventory).

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