Fannie Mae to Allow Some Tenants to Stay After Foreclosure
(Update 1 reflects a media statement issued by Fannie Mae. Update 2 reflects the statement by James Lockhart, issued by the FHFA.) It's the gift that keeps on giving. Government-sponsored entity Fannie Mae's (FNM) efforts to prevent foreclosures and keep people in homes culminated in an unprecedented announcement Sunday that the banking giant would sign new leases with renters living in foreclosed properties owned by the company. The effort is estimated to benefit up to 4,000 renters initially, according to a report by the New York Times. “There are renters all around the country who have been holding up their end of the bargain and paying their rent faithfully, but the landlord got into trouble, and so the renter is now unfairly facing eviction,” John Taylor, president of the National Community Reinvestment Coalition, told the Times. "Fannie Mae is finalizing a new policy that will allow tenants in Fannie Mae-owned foreclosed properties to stay in their homes if they can make their rental payments," read a media statement issued Monday afternoon by Fannie. "For tenants who would prefer not to enter into a lease, we will continue to offer monetary support for the transition to a new residence as an alternative option." A brief look into the company's recent initiatives shows an emerging pattern of philanthropic behavior. In November, GSEs Fannie Mae and Freddie Mac (FRE) announced they would temporarily suspend foreclosures and evictions until early January to allow time for the streamlined modification process to go into effect. The moratorium would also allow families to remain in their homes for the holiday season. Then, last week, Fannie Mae announced it had taken a series of steps to allow servicers to intervene in troubled mortgages even before a borrower becomes delinquent. Now with the announcement that tenants can not only stay in foreclosed properties, but sign new leases with the company, Fannie will effectually become a giant, federally-regulated landlord and banking philanthropist apparently intent on doing whatever necessary to keep people in their residences. “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,” Fannie Mae spokesman Chuck Greener told the Times. “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.” The GSEs' regulator, James Lockhart of the Federal Housing Finance Agency, issued a statement Sunday calling for reform on policies regarding renters living in foreclosed properties. "Both Enterprises are discussing with FHFA how to best handle situations where renters live in a house going through foreclosure," Lockhart said. "We expect each GSE to have an updated policy dealing with this situation shortly, one that will aim to protect both tenants and the mortgage holder." A spokesman for Freddie Mac told the Times they were looking at a number of options, including a program similar to Fannie Mae’s, but no decisions had yet been made. Write to Diana Golobay at firstname.lastname@example.org. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.