Here’s one way to make the mortgage mess work for you: According to The Wall Street Journal, the slowdown in foreclosures due to questions about paperwork, note-holders and robo-signers has allowed some homeowners to live mortgage-free for several months; some are even renting out their homes. The Journal estimates that the “stealth stimulus” gives these homeowners a “subsidy” of about $2.6 billion a month.

According to the Journal, some homeowners in states such as New York and Florida can stay in their homes for more than six months while legal issues are worked out. And if the money they’re not spending on their mortgages goes into the local economy, “it’s probably stimulative,” said economist Ivy Zelman. Then there are those who’ve turned their homes into new sources of income:

Some homeowners who have defaulted on their mortgage payments are cashing in by renting out their homes. Joe Mayol, a real-estate agent in Palmdale, Calif., estimates that in his area about two-thirds of houses with defaulted mortgages are occupied, and half of those by renters. “People are getting money out of these houses,” he said.

Ms. Zelman says her research suggests defaulters do spend much of the money on consumer services and goods. “People are taking what they would have been spending on a mortgage and spending it somewhere else,” she says.

However, the Journal is quick to add that local communities still end up getting a bad deal, since they usually can’t collect property taxes on foreclosed homes, and the foreclosure crisis only adds to uncertainty about the housing market.

“I don’t think that’s the kind of consumer recovery we want, if the only reason they’re spending a bit more is that they’re not paying their other bills,” Joseph Carson of AllianceBernstein told the Journal.

Stealth Stimulus: Defaulters Who Live for Free [WSJ.com]

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