Fannie Mae Foreclosures Won’t Evict Renters – Others Not So Lucky

December 15th, 2008 | by alexis |

Fannie Mae announced Sunday that renters don’t have to fear eviction if their landlords get foreclosed. The loan association has reworked policies to allow tenants that are up-to-date on their rent to remain in their homes even after the foreclosure is underway. It’s a move that falls in line with Fannie Mae and Freddie Mac’s late November announcement that they would place a holiday moratorium on owner-occupied homes until January 9.

Until recently, foreclosures across the country shut out renting tenants from homes that owners could no longer pay off. Even if a tenant was current on their rent, they could be forced to move out if their landlord wasn’t able to pay the house’s mortgage.

National Community Reinvestment Coalition president John Taylor didn’t see the situation being exactly ethical. “There are renters all around the country who have been holding up their end of the bargain and paying their rent faithfully,” says Taylor, “but the landlord got in trouble, and so the renter is now unfairly facing eviction. It’s really good news that Fannie Mae is doing this.”

The formal announcement came after protests out of Connecticut argued that Fannie Mae proceeded with the evictions of a dozen families in the New Haven region even though it went against policy. Shutting out the tenants in good standing was argued as an act that goes against legislation mandating Fannie Mae “permit bona fide tenants who are current on their rent to remain in their homes under the terms of the lease.”

Fannie Mae’s decision, one that essentially makes the loan association a national, government-controlled landlord, is expected to initially help 4,000 renters who are living in foreclosed homes owned by the company. Altogether over 16,000 renting tenants should benefit from the move.

But Fannie Mae can only help so many subjected renters. The goal, as Taylor suggests, is for the private financial sector to follow suit – a difficult task, for certain. Ted Meyer, a spokesman at Deutsche Bank, one of the biggest trustees of mortgage-loaned securities, says the German based bank is not in a position to act on Mae’s precedent. Neither are other institutions like JPMorgan Chase.

One such reason is ownership. Any given property is “held in trust by [the bank] but is effectively owned by the hundreds or thousands of people that own a tiny sliver of mortgages in any one pool,” according to Meyer. He goes on to suggest that the responsibility of handling renters should go to the local servicers of the mortgages, as they’re the ones responsible for hiring real-estate agents to put the foreclosed homes back on the market.

JPMorgan Chase, which owns over 2 million loans around the country, is taking a less open-minded approach. “We’re not in the business of managing properties,” says spokesman Thomas Kelly, “and we’re not in the business of being a landlord.”

But Taylor says that these banks need to catch up with the times. “If your (landlord’s) loan is owned by Fannie Mae, you get to stay in your home. If your (landlord’s) loan is owned by someone else, you’re on the street. These banks need to realize they’re in the property management business now, whether they like it or not.”

RealtyTrac, an online marketplace for foreclosure properties, recently reported that 259,085 homes were foreclosed during the month of November, up 28% from last November’s figures.

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  1. 4 Responses to “Fannie Mae Foreclosures Won’t Evict Renters – Others Not So Lucky”

  2. By Carl Zezwitz on Dec 29, 2008 | Reply

    Good thing. Nobody deserves to be put out on the street because their landlords can handle his or her own finances. Let’s hope Bank of America and money-managers like JP Morgan Chase follow Fannie Mae’s moves and start showing a little humanism.

  3. By Robert M. Burch on Jan 21, 2009 | Reply

    Apparently Mr. Taylor of Deutsche Bank is not aware of the Rental laws in the state of New Jersey. New Jersey’s tenant laws do not permit a tenant to be evicted if the owner of their rental property is foreclosed upon.

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