Fannie Mae to Stop Evictions on Foreclosed Homes

December 15, 2008 No Comments »

for rent

Fannie Mae is reportedly working on a new policy that would permanently end the practice of evicting tenants living in foreclosed homes, according to the Wall Street Journal.

The mortgage financier is changing its policy in light of a potential lawsuit from legal-aid group New Haven Legal Assistance, who claims evictions would violate new legislation tied to the rescue of Fannie and Freddie earlier this year.

Specifically, the pair is required “to permit bona fide tenants who are current on their rent to remain in their homes under the terms of their lease.”

How they will manage this potentially tricky feat is still to be determined, but it sounds like it could get complicated.

Last month, both Fannie and Freddie enacted a temporary foreclosure freeze during the holidays to ensure no homeowners were displaced.

The companies extended the benefit to renters living in foreclosed homes as well, but only until January 9.

A recent NYU study found that at least 15,000 renter households in the city were affected by foreclosure last year, costing the families thousands in the process.

However, most tenants don’t know their rights when it comes to evictions, and often opt to take “cash for keys” instead, payouts which can range from $500 to $1,000 to simply move on.

It’s unclear if other mortgage lenders will get onboard, though it’s somewhat unlikely that large banks will want to play landlord unless they feel it’s more profitable than doing otherwise.

Of course, it may be more complicated than that, as many of the mortgages in question are owned by numerous investors, likely putting the decision in the hands of loan servicers.

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