WASHINGTON -- Here are two questions getting a lot of attention on Capitol Hill and from the Obama administration: When homeowners lose their houses to foreclosure, should they be able to stay in the property, leasing it back at fair market rent from the lender?

Should they also get an option to purchase the house from the bank at the end of the lease term, assuming they have the income to afford it?

Before leaving for their August break, Democrats and Republicans in the House took a rare, unanimous stand on both questions by passing the Neighborhood Preservation Act by voice vote. The bill was co-sponsored by Reps. Gary Miller, R-Calif., and Joe Donnelly, D-Ind.

The bill would remove legal impediments blocking federally regulated banks from entering into long-term leases -- up to five years -- with the former owners of foreclosed houses. It would also allow banks to negotiate option-to-purchase agreements permitting former owners to buy back their houses.

The idea, said Miller, is, "at no cost to the taxpayer," to "reduce the number of houses coming into the housing inventory and preserve the physical condition of foreclosed properties," which ultimately should help stabilize values in neighborhoods with large numbers of distressed sales and underwater real estate.

If the bill is approved by the Senate, participation by banks would be purely voluntary. But the legislation might encourage banks to calculate whether they would do better financially taking an immediate loss at foreclosure, or by collecting rents and then selling the property at a higher price in four or five years.

Though it was not opposed by banking lobbies, the bill quickly attracted critics. The Center for Economic and Policy Research, a think tank based in Washington, said a key flaw is to leave decisions about leasebacks solely to banks themselves.

"If Congress does want to give homeowners the option to stay in their homes as renters," said the group, "it will be necessary to pass legislation that explicitly gives them this right."

Some private-industry proponents of short sales -- where the bank negotiates a price that's typically less than the owners owe on their note -- say turning banks into landlords won't work well, either for the banks or foreclosed owners who want to stay in their houses.

Al Hackman, a San Diego realty broker with extensive experience in commercial transactions, argues that leasebacks with options to buy are the way to go -- but not if banks run the show, Continued...