Will Right-to-Rent Act Rescue Foreclosed Owners?

If your lender forecloses on your mortgage but lets you stay in your house as a tenant, is your real-estate saga more likely to have a happy ending? A new law making its way through the House of Representatives may give you the chance to find out.

The riddle for most cities plagued by foreclosure involves solving two problems at once: helping banks recover unpaid mortgage bills while helping people stay in their homes.

If the banks write off bad loans, they have no money to lend to other borrowers; if the banks foreclose and evict on every owner who can't make a payment, cities empty out. What to do? Raul Grijalva (D-AZ), an ally of House Speaker Nancy Pelosi, has proposed a solution for defaulting owners of "moderate-value homes."

Grijalva's "Right to Rent Act of 2010," introduced on Tax Day, would basically keep the homeowner from having to look for a new house. It works as follows.