GSEs Extend Eviction Suspension; Freddie Launches Rental Option
Merry Christmas, Happy New Year, and now Happy Valentine's Day from your friends at the GSEs. Freddie Mac (FRE) and Fannie Mae (FNM) announced Friday morning they are extending the suspensions of evictions triggered by foreclosures through the end of February. The suspension will apply to all single family properties with Fannie or Freddie-owned mortgages that have been foreclosed upon. This is the third extension of eviction suspensions. Both Fannie Mae and Freddie Mac started a program to suspend foreclosures evictions on Nov. 26, set to expire on Jan. 9, but it was extended until Friday. In the same announcement Friday, Freddie Mac also outlined a new strategy -- akin to Fannie Mae's new policy implemented this month -- offering qualified owner-occupants and tenants the opportunity to lease properties on a month-to-month basis after foreclosure. "First and foremost, Freddie Mac's REO Rental Option is intended to help cushion the impact of foreclosure on families who own or rent homes with Freddie Mac-owned mortgages," said David M. Moffett, CEO of Freddie Mac. Under Freddie's REO Rental Option, leases will be offered to current renters on a month-to-month basis at market rents or the rent amount they were paying prior to foreclosure, whichever is less. The rent for former owner-occupants will be the market rent, determined by Freddie Mac's contracted property management firm. To qualify, current tenants and former owner-occupants must be able to demonstrate they have "adequate income" to pay the monthly rental amount, the company said in a press release. The home must also meet applicable building codes or be "affordably" brought into compliance, to be eligible. Further Efforts Freddie Mac said it will also explore loan modification options that may enable owner-occupants to retain ownership of their homes by reinstating their mortgage with modified terms. "In about half of all foreclosure sales there is no conversation between the borrower and the mortgage servicer about workouts," said Ingrid Beckles, senior vice president of Default Asset Management at Freddie Mac. "Before starting the eviction process, we want to ensure there is one last effort to achieve a workout." Reports surfaced from the Wall Street Journal Thursday that Fannie Mae has taken another stride to prevent foreclosures via workouts by teaming up with Neighborhood Assistance Corp. of America, a non-profit community advocacy and homeownership organization. The agreement is one of many measures the government entity and its main rival, Freddie Mac, are working on to avoid a further surge in foreclosures. While the agreement hasn't been announced yet, the Journal said it was confirmed by Fannie Mae and Bruce Marks, chief executive of the NACA. Write to Kelly Curran at email@example.com. 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.