I almost entirely agree with you, Johnny. While I am firm believer in the idea that a bank has no need to lower the balance owed, just as you wouldn't lower the rent amount in an active lease just because the people could no longer afford it, I agree with you that a credit/criminal isn't all that is needed. When you have a prospect who is transitioning from home ownership, you need a statement from the bank that all payments were made timely and that they have paid, or expect to pay off, the note.
Nobody forces a person to buy a home they can't afford, there are no guarantees when anyone makes an investment. Sometimes they go in the crapper. But these folks shouldn't become you or your community's burden either.
As for the secondary question, there are definitely bigger issues on a criminal report than others. For instance, if someone has had a DUI, I don't consider that reason not to rent. While a major issue and certainly not to be taken lightly, it doesn't impact their ability to pay me. If they had a theft conviction or especially anything drug related (possession, intent to distribute) that is automatically a no. It just has to be clear and in writing to avoid any fair housing or other complaints.	
Last edit: by Christopher Higgins.	Reason: forget one thing	
Here is the thing; I am willing to BET that there are so many people that are underwater on their homes, we are getting at least one per week as a prospective resident. I have one example: prospective resident has been in their home for almost 20 years, and the loan was sold to another bank, who either intentionally snuck in a clause that allowed the bank to adjust the interest rate MONTHLY (not annually as originally agreed), or began doing it in error and is not willing to correct it. Initial payment was LESS than the rent at the property. As a result of that clause, the monthly mortgage payment nearly QUADRUPLED in 2 years! Aside from that, the property was appraised (for insurance reasons)at less than HALF what is owed on the note! This is happening all over the country.
I keep hearing reports that Wall Street is seeing an end to this recession, but what about MAIN Street, where we all live and work???	
Johnny, my other business is that I own real estate schools in Montana, Alaska, Idaho, Kentucky and Florida - so I deal with these sorts of questions all the time. The clause you mentioned is not only unlikely, it would be much more than illegal. The problem with so many of these sob stories is the situation being described is written right into the mortgage documents the person signed. No mortgage company can, or would be legally allowed to, raise interest rates monthly if the person had not signed a document at the close for that mortgage that allowed the bank to do this. Fine print is small, but that doesn't mean it isn't important. I would say less than 5% of the people in foreclosure proceedings have a legitimate complaint, everyone else is just trying to blame a bank for the fact they signed documents they did not read or care to investigate. Bottom line - someone walking away from a property they have lived in, and invested in, for 20 years will not think twice about skipping out on a lease. Their credit is shot, why bother following rules?	
I agree with you 100% Christopher! People should take responsibility for purchasing homes they knew they couldn't afford.
Background and credit checks are great and a definate must but rental references should be right there with them. Everything helps in obtaining a great resident profile.	
I just had a prospect come in and indicate that they were in the process of filing bankruptcy, and losing their home to foreclosure (currently so underwater on the mortgage they need scuba gear). They were in THIS home for more than 15 years (the first 5+ as a renter, then the owner decided to sell to them and guarantee the note); and their last home for more than 15 years as well....
In this case, the applicant's single biggest expenses (after housing) are medical care related (copayments and perscripion medications) for ongoing conditions. Both household members are on SSI Disability as a result of these. The current home is a 2 story and there are now mobility issues; so they are choosing to walk away.
This is not a question of responsibility. It is going on everywhere as a result of the economy.
The bank's reason for not negotiating? It would not make the investors happy. I am sure a vacant house that won't sell for the value of the note will make them just as happy.....
Johnny Karnofsky wrote:
There has been no answer to this part of the question.... anyone????	
That's just a no, no question. It is one thing to have broken a lease or owed money upon move out. This is significantly more and shows irresponsibility - The landlord had to file for eviction to remove the tenant. I automatically deny any application for prior evictions, bankruptcies or foreclosures. Doesn't matter if they have finally taken care of it, it is letting things get to that point that is the problem.	
I just disagree with you, Johnny. I don't think it is a matter of just an unfortunate turn in the economy. These people let matters get way out of hand if they are in foreclosure. It takes over a year for that process to play itself out, it isn't like missing one or two mortgage payments. For a person to have had to sell and move because they could no longer afford their mortgage payment, that is a responsible person and a good tenant. A person who just said "oh well, the economy sucks I guess I will just see what happens," that is an irresponsible person and would likely be a bad tenant. They have ignored months and months of notices, not taken advantage of numerous government and charitable options to solve the problem. Landlords rent to these people at their own peril.
I go back to the essential point - buying any investment is a gamble. Buying a house for a sales price of $200,000 and thinking that it would only go up in value is stupid and not supported historically. Yes, year over year, most homes go up. Some go down. That can be blamed on many things, not just the current economic climate. To not find a way to make it work and walk away from 10 years of equity just because the "owner" doesn't see when prices will rebound sufficiently is a bad sign to me. The quote about the bankers response is classic CBS anti-capitalist spin. No banker in their right mind would say that to a client trying to negotiate a mortgage, even if it were true.	
Christopher Higgins wrote:
The question is... how far back should you go? I think that, if the judgement was paid, and it occured more than 5 years ago; that the person has become wiser for it and is ready to start fresh with a new attitude. Keep in mind that, once paid, the court is supposed to remove the item from the credit report; so if you only go back one prior landlord, you may not discover it; and if the landlord that won the eviction action is NOT that last reference, this discovery would be an error.	
Signing a lease w/ someone who has filed for bankruptcy that has not been discharged can be a major issue. It could be that any debt incurred during this time period, the resident would not be held liable for this debt when the Bk goes to court. Then you are not able to file a collection b/c they are not legally liable. Check w/ your atty. It is easy to feel sorry for persons in unfortunate circumstances whether they caused it directly through bad money management or maybe health issues, etc. BUT remember that we are not a social service agency. We manage a property for an owner & are responsible for protecting the owner's interest, not to provide housing for unqualified applicants.	
D Pinney