Fannie Mae decides they like renters!

Mortgage giant Fannie Mae has made a major policy change nationwide for renters living in properties that they have foreclosed on.  Up until now, renters could be forcibly evicted from their home after a foreclosure occurred, often without any warning whatsoever.  Starting January 9th, when they start their foreclosures back up, they plan to start allowing renters to stay in properties!

Turns out that policy of surprise eviction may or may not have been slightly unethical, dumb, and possibly illegal.  Remember when Fannie Mae took that gigantic $700 billion government bailout check?  Turns out there were strings attached, and one of those strings was that “tenants in good standing” of properties they foreclosed on were to be allowed to remain in the property.

Did you miss that provision in the 451 page bailout bill?  Don’t worry, so did Fannie Mae, but now that a couple of lawyers from Connecticut have pointed it out, Fannie has decided to comply rather than face a lawsuit.  I think it’s great that SOMEONE is actually looking out for tenants rights, but the decision leaves me with two questions:

• Who is going to manage the tenants and rental properties?  Is this an internal management structure  being planned (bad idea!), are they going to contract it out to local third party management firms (good idea!), or do they even have a plan for this in place yet? (SUPER bad idea!)
• What sort of plans are in place to prevent fraud?  When some people get evicted, they damage the house on the way out.  The financial equivalent would be to rent the house to someone on a multi-year lease for $1/month.  Even more fraudulent would be to rent the house to an acquaintance(accomplice?) for $1/month and then sublet it back from him.  Now you’ve managed to not pay the rent in the 6-12 months, and you’ve got a fixed rent of $1/month, without even having to move after the foreclosure!  What is Fannie Mae doing to protect itself from that?

Unfortunately, I haven’t found any good answers, yet.  The policy itself is excellent, it’s all those pesky associated details that get in the way.  Bear in mind that while keeping these properties occupied will help protect the condition of the home AND neighborhood, it’s also going to force the lenders to bleed even more red ink since the rental income is considerably lower than the sales value, which would skew their earnings statements further.
~Jonathan Benya- Realtor
Century 21 New Millennium
9405-A Chesapeake St
La Plata, MD 20646
301-609-9000
301-653-8116
Charles County Real Estate Blog