In the wake of reform enacted to promote homeownership, analysts at the Center for Economic and Policy Research are saying that ownership may not be the smartest option. In a report released today, The Gains from Right to Rent in 2010, the CEPR suggests that giving homeowners the right to rent their house at a fair market price could be a game changer in the nation's foreclosure crisis.

The report dissects the benefits of a drafted bill, H.R. 5028, also known as The Right to Rent. Under the legislation, homeowners entering the foreclosure process would be able to occupy their homes for up to five years, while paying rent to a lender. Rent would be based on fair market price as determined by an independent appraiser and adjusted annually.

"This would give homeowners an important degree of security, since they could not simply be thrown out on the streets," wrote Dean Baker and Hye Jin Rho, co-director of and research assistant at CEPR. "This policy should also benefit neighborhoods in the most hard-hit areas, since they would not have large numbers of vacant homes following foreclosures."

The CEPR report, which compares the costs of owning a home and renting in 16 major metropolitan statistical areas around the U.S., found that homeowners would see substantial reductions in costs by becoming renters if they rented in a bubble-inflated market. Savings are much less, however, if the market was not affected by the housing bubble.

For example, in the Los Angeles MSA, homeowners would save $1,586 per month by becoming a tenant. The median home price in 2006 and 2007 was $608,600. Based on that number, CEPR found the monthly cost of ownership as $3,128 versus $1,420 to rent.

New York/New Jersey, Sacramento, San Diego and San Francisco savings are all over $1,000.

In Detroit, however, the marginal saving is only $89 between owning and renting  home. MSAs including Baltimore, Chicago, Cleveland, Minneapolis, Philadelphia, Phoenix, and Tucson had a difference of less than $500.

“With roughly one-in four mortgages underwater, the loan modification plans put forth so far have done little to help homeowners facing foreclosure,” said Baker.  “Right to Rent, on the other hand, would benefit millions, provide families with real housing security, and could go into effect immediately.”

And it could fill adequate demand. According to a survey done recently by Apartments.com, 60% of respondents said they prefer renting to buying a home. Almost 30% said they had never rented before but are currently looking for an apartment.

The CEPR report includes an appendix with cost analysis for 100 MSAs around the country. Amounts for houses are based on costs for a house that sells at 75% of the median house price. The basis for rental costs is the Department of Housing and Urban Development's Fair Market Rent for a two-bedroom apartment. The calculations used assume the homeowner faces a marginal tax rate of 15%. View the full report here.

Write to Christine Ricciardi.

Servicers participating in the Home Affordable Modification Program converted 33,342 trial modifications into permanent status in August, down 26.7% from the 45,512 in July.

The Treasury Department launched HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. Since then, the participating servicers have provided 468,058 permanent modifications. Borrowers must submit all documents and make three monthly trial payments to receive a permanent modification.

The Obama Administration set an early goal for 3 million to 4 million borrowers to receive aid under HAMP. After 17 months, servicers have reached more than 15% of that mark, up from slightly higher than 14% in July.

If servicers gain an average of 1 basis point every month, they would not reach 3 million permanent modifications for another 85 months, or another seven years. But HAMP is set to expire at the end of 2012.

Servicers have offered more than 1.5 million trials to borrowers who qualify for the program and have started 1.3 million of them, but canceled 46,699 trials in August, 28% more than permanent modifications completed in the same month.

According to the Treasury, the most common causes of canceling a trial modification are: insufficient documentation, another default during the trial stage, or the borrower was deemed ineligible, meaning the loan was already at 31% of the household's monthly income.

Servicers are working through the backlog of borrowers stuck in trial modifications. In August, the amount of borrowers in a trial for more than six months fell to fewer than 95,000 from 118,000 in July.

Richard Simon, a spokesman for Bank of America, which has completed more permanent modifications than any other in the program (see below), said trials are declining as servicers work through that backlog.

"This continues the expected decline in trials across the industry as the servicers reach decisions on eligibility for permanent modifications, particularly on aged trials, and the inflow of new trial modifications has slowed, reflecting the change in government guidance requiring full documentation of trial mods," Simon said.

Borrowers receiving a permanent modification received an average 36% discount on their monthly payments for an average of more than $500 a month. According to the Treasury, borrowers with a permanent modification are guaranteed lower payments for five years and fixed terms at current market rates for the remaining life of the loan.

HomeEq, the former servicing arm of Barclays Capital recently acquired by Ocwen Financial Corp., was the top HAMP servicer for the fifth-consecutive month. It converted 91% of its trial modifications into permanent status, the highest of any servicer. It has converted 4,948 permanent modifications and holds 13,965 HAMP-eligible loans.

Wachovia Mortgage FSB converted 80% of its trials into permanent status in August, which makes it the second highest for two months in a row, but the percentage fell from 81% in July. The company has conducted 7,893 permanent modifications and holds 25,937 HAMP-eligible loans.

Ocwen moved back into third, converting 71% of its 29,871 HAMP-eligible portfolio into permanent status during the month. It has totaled 17,970 so far.

The big-four banks all had slight conversion rate increases in August. CitiMortgage, the servicing arm of Citigroup, led them by converting 33%, totaling 47,236 permanent modifications, up from 44,276 the previous month.

JPMorgan Chase converted 31% for a total of 60,932 permanent modifications through August, up from 58,489 in July. Wells Fargo had a 29% conversion rate, totaling 48,830 permanent modifications, up from 46,732 in July.

Bank of America held the highest amount of permanent modifications of any participating servicer in August, at 79,859, up from 76,330 in the previous month, a 26% conversion rate. BofA holds 383,482 HAMP-eligible loans, down from 416,879.

Write to Jon Prior.

The Obama Administration's latest scorecard on the housing market touted advances in refinancing and house prices in August.

The Department of Housing and Urban Development and the Treasury Department compiled data for the monthly scorecard. According to the administration, stabilizing housing prices leveled off in the past year after 30 straight months of declines. Homeowners added $95 billion in home equity in the second quarter.

The scorecard did acknowledge "a dip" in home sale figures in July after the expiration of the homebuyer tax credit. But since April 2009, record low mortgage rates have helped more than 7.1 million families refinance, saving more than $12.7 billion.

According to the scorecard, more than twice as many modification agreements have been begun compared to foreclosure completions. Servicers started more than 3.3 million mod agreements between April 2009 and July 2010, including 1.3 million through the Home Affordable Modification Program and more than 1.6 million through proprietary programs.

Through HAMP, servicers have now completed more than 33,000 permanent modifications in August, pushing the total to 468,000 since the program launched in March 2009. But the amount of permanent HAMP mods completed in August was 27% below the amount done in July.

“Over the last 17 months, the Obama Administration has taken comprehensive action to keep interest rates at record lows, provide incentives to responsible homebuyers, and help millions of families stay in their homes,” said HUD Assistant Secretary Raphael Bostic. “But we’re certainly not going to stop fighting to turn things around."

Write to Jon Prior.

Lehman Brothers Holdings is considering selling its largest real estate asset, apartment-complex owner Archstone, which it acquired in a $22 billion leveraged buyout.

Bloomberg reports Gerard Uzzi, a lawyer for Lehman creditors, said in a court filing that the sale would be made to two affiliates — Lehman Commercial Paper Inc. and Luxembourg Residential Properties Loan Finance also known as Luxco. The terms of the sale have yet to be defined, according to the filing.

Uzzi said in a footnote that the deal might represent "the most valuable give-up" by Lehman to its affiliates. Archstone has required two bailouts from its bankers in the last two years.

Lehman Brothers won court approval in May for a second attempt at savings the firm's investment in Archstone. The restructuring agreement gave Lehman authority to join Barclays and Bank of America Corp. (BAC: 7.29 -0.14%) in converting $5.2 billion worth of Archstone loans to preferred equity, according to Bloomberg.

In 2009, the three firms committed an additional $484 million in financing to Archstone.

Write to Christine Ricciardi.