Why not a national homestead law?

[drwex]

A homestead law is a specific exemption (read about MA's homestead law) protecting a person or family's primary residence against seizure for debt repayment. Enacted properly a homestead law could protect peoples' basic shelter needs from things like subprime mortgage foreclosures while denying protection to real estate speculators, who generally don't live in the speculated properties. Several states have such laws to varying degrees (some protect the house as a whole; some protect property up to a fixed limit, etc). I haven't been able to find a reliable data source on how many states already have such laws and how many do not.

Isn't protecting homes that people actually live in and want to continue to maintain a desirable outcome? Why is nobody talking about a national homestead law? It wouldn't prevent people from having massive debts and possibly having to declare bankruptcy, but it would prevent them from losing their homes while they get their financial feet back under them.

I'm wondering if there's some obvious disadvantage that I'm missing (other than to creditors who can't seize and resell negative-equity houses; I'm not crying a lot of tears over this just this moment).

Comments

[drwex]

Correct. MA's homestead law doesn't prevent mortgage foreclosures. TX and FL do, for a primary residence. The laws vary from state to state, which was part of my point. A national homestead act could enshrine a protection for a primary residence.

[rdhdsnippet.livejournal.com]

This is not something I've ever thought about before, overall, so bear with me.

I think that enacting such a thing is going to make mortgages a LOT harder to get for people like, say, my family, who really stretched ourselves to buy our first home and didn't have much down for it. On paper we weren't such a good risk, but in actuality because we were very dedicated to buying and keeping a home. I would NEVER have missed a mortgage payment because, you know... our HOUSE, no matter what else other than food that I might have had to go without. If you take away the ability to foreclose on a house, I would imagine that the default rate is going to skyrocket.

Do I have a logical fault here that I'm overlooking?

I'm not sure that I think you have a "right" to own a home if you can't pay for it.

Now... homestead tax exemption I am all for.

[drwex]

It could be the case that a homestead foreclosure exemption would make mortgages harder to get. That might also be a harder thing - part of the problem is that people who should never have taken on a mortgage were lured/pushed into their present precarious position.

When I lived in Texas there was an absolute homestead exemption - it didn't slow down the flow of mortgages. Just one data point.

Finally, the idea of a homestead is not that you get out of debt for free. You still have the debt and have to pay it off. You can be forced into bankruptcy and have your wages garnished or your car seized or whatever. It just says "you can't be forced out of your home". Homelessness tends to compound the problems, as it makes schooling for kids harder as well as getting a job that might let you pay off debts.

[drwex]

Err, what I meant to say was that having fewer people getting easy mortgages might be a GOOD thing. If someone's not ready for the responsibility then they ought not to get into overextended positions in the first place.