Wow, check out this bit of news in The New York Times this morning:
In a move that provides relief to thousands of renters who face eviction but draws the federal government even deeper into the housing market, the loan giant Fannie Mae said Sunday that it would sign new leases with renters living in foreclosed properties owned by the company.
It is the first nationwide effort to provide widespread relief to renters ensnared by the unfolding mortgage crisis, and it will effectively transform Fannie Mae — a government-controlled mortgage finance company — into a national landlord. It may also increase pressure on private lenders to establish similar programs and on lawmakers to pass renter relief. …
Last month, both Fannie Mae and Freddie Mac, the other government-controlled mortgage giant, temporarily suspended foreclosures and evictions until early January. Fannie Mae will now offer renters in foreclosed properties month-to-month leases until the property is resold.
I wrote this summer about some of the headaches associated with being a renter in a house that a bank forecloses on. I quoted a statistic from the California Apartment Association that as many as one-quarter of the single-family homes in foreclosure in the state have renters living in them.
From that story:
“It’s a bad situation for good tenants to be in foreclosed properties,” said Carlsbad eviction attorney James Burmeister. “A lot of these tenants are suddenly getting an eviction and then the tenant’s the one losing his house, with his family and his kids and his school district and paying his rent on time.”
Homeowners who live in their house are only entitled to three days once the bank has repossessed the house before they’re evicted. Tenants get at least 60 days to stay there, and they don’t have to pay rent.
Now it looks like Fannie is trying to find a way to stop the financial bleed in the time when tenants have previously been living rent-free. One big question will be how well the bank communicates with the company managing the foreclosures, which in turn would need to let the real estate agents selling the foreclosed properties know which tenants have leases, and which houses are owned by Fannie Mae.
I called Mark Goldman, real estate professor at SDSU and all-around mortgage guy for Windsor Capital, for his take:
“It’s a noble experiment, but I don’t know that’s going to serve anyone particularly well,” he said. “There’s a possibility it could cause more problems than it solves.”
Goldman said he thought a tenant could’ve been in a better position the way things were, when they could stay until someone comes to kick them out. Usually a real estate agent selling bank-owned properties comes with “cash for keys” — some financial help with moving costs if a tenant moves out and leaves the house in good condition.
Fannie Mae says it will still make that option available:
“While it may be sometimes tougher for us to sell a property when people are in it, we understand that lots of people are in tough situations right now,” said Chuck Greener, a Fannie Mae spokesman. “If a renter wants to stay in their home, we’ll make that happen. And if they want to move out, in many cases we’ll help them pay for the move.”
A spokesman for Freddie Mac told the Times the bank was looking at similar options but has not made any decisions yet.