Fannie Lets Renters Stay, But Evictions Still Loom
This should come as a welcome relief to about 4,000 renters who live in properties foreclosed on by Fannie Mae. The now government-controlled mortgage giant announced it would not evict tenants of foreclosed properties who were current on their rent. Freddie Mac is considering the idea, but hasn’t made a move yet.
It makes total sense. Why leave an empty property, ripe for squatters and vandalism, when you can keep a family in it and make a little money off the rent at the same time? It’s not like these properties are going to sell lickety split. Of course Fannie was threatened by a lawsuit from the New Haven Legal Assistance Association, but still the company did the right thing.
“No renter should feel any apprehension of losing their home,” wrote Chris Lu, Fannie’s principal deputy general counsel, in a letter to the New Haven group.
Of course, that’s only renters in Fannie-owned properties. That is, by far, not every renter out there living in an about-to-be-foreclosed property. Once again, we go back to the issue of who actually owns these properties. Deutsche Bank , one of the biggest trustees of mortgage backed securities, told the Wall Street Journal that they couldn’t do the same because while they hold the trust, the properties are owned by thousands of people “that own a tiny sliver of mortgages in any one pool.”
So it’s the same deal as the modification troubles. Still, I have to give props to Fannie for doing not only the right but also the smart thing. Some estimates show it costs $2,500 to evict a family. Given the number of foreclosed rental properties out there (no I don’t have the number but it’s in the thousands) that’s millions of dollars.
The trouble is that Fannie is inevitably going to have to sell those properties off into the marketplace, such as it is. The renters may get a stay of execution and some notice that eviction will come at some point, but it’s not home sweet home for the duration.
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