In a move that provides relief to thousands of renters who face
eviction but draws the federal government even deeper into the housing
market, the loan giant Fannie Mae said Sunday that it would sign new leases with renters living in foreclosed properties owned by the company.
It is the first nationwide effort to provide widespread relief to
renters ensnared by the unfolding mortgage crisis, and it will
effectively transform Fannie Mae — a government-controlled mortgage
finance company — into a national landlord. It may also increase
pressure on private lenders to establish similar programs and on
lawmakers to pass renter relief.
“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,” said John Taylor,
president of the National Community Reinvestment Coalition, a consumer
advocacy group. “It’s really good news that Fannie Mae is doing this.
Now the question is whether private sector will follow suit.”
In
recent months, skyrocketing foreclosure rates have exposed as many as
70,000 renters to evictions, even though many never missed rent
payments, according to analysts who track housing data. In many cities
and states, renters can be evicted after their home goes into
foreclosure, regardless of how long their lease stretches into the
future.
Many financial institutions — including JP Morgan Chase and Bank of America — have policies to evict renters after foreclosure, company representatives said.
Fannie
Mae’s initiative is expected to initially benefit as many as 4,000
renters living in foreclosed homes owned by the company. Fannie Mae has
traditionally only bought and sold mortgages. But when a loan held by
the company goes into foreclosure, Fannie Mae gains ownership of the
underlying property until it is resold to new investors.
Fannie
Mae owned 67,500 properties in foreclosure at the end of September,
according to the company’s most recent filings. Most of those were
owner-occupied. Under the new policy, former owners will most likely
not be eligible to rent homes they lost in foreclosure.
Last month, both Fannie Mae and Freddie Mac,
the other government-controlled mortgage giant, temporarily suspended
foreclosures and evictions until early January. Fannie Mae will now
offer renters in foreclosed properties month-to-month leases until the
property is resold. A company representative said program details were
still being worked out.
“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,” said Chuck Greener, a Fannie
Mae spokesman. “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.”
A spokesman for Freddie Mac said that the
company was looking at a number of options, including a program similar
to Fannie Mae’s, but that no decisions had been made.
The
companies’ regulator, James B. Lockhart of the Federal Housing Finance
Agency, issued a statement on Sunday saying that he expected both
companies to update their policies shortly regarding renters living in
foreclosed properties. Both Fannie Mae and Freddie Mac were taken over
by Mr. Lockhart’s agency this year and now operate in a conservatorship.
Representatives
of some major banks said it was unclear if Fannie Mae’s new policy
would prompt their institutions to change theirs.
“We’re not in
the business of managing rental properties, and we’re not in the
business of being a landlord,” said Thomas Kelly, a spokesman for
JPMorgan Chase, which owns about two million loans. “Clearly the renter
is caught in the middle in cases like this. When a property is in
foreclosure, we follow the law.”
Some lawmakers and housing advocates say such policies are unjust.
“If
your loan is owned by Fannie Mae, you get to stay in your home. If your
loan is owned by someone else, you’re on the street,” said Mr. Taylor
of the National Community Reinvestment Coalition. “These banks need to
realize they’re in the property management business now, whether they
like it or not.”
Some lawmakers have complained that evicting
renters is unfair. In November, the Los Angeles City Council voted to
draft a law that would bar financial institutions from evicting renters
living in foreclosed homes.
Last year, the House passed a
measure that would require the new owner of a foreclosed property to
inform renters at least 90 days before an eviction. That bill failed to
pass the Senate. Law enforcement officers in some states have refused
to evict residents of foreclosed properties.
But Yadilka Torres,
who rents a home in New Haven, Conn., for $775 a month, had no such
protection. Fannie Mae took possession of her house in September, when
it went into foreclosure. Even though she was current on her rent, she
received an eviction notice saying that she and her two young children
would have to leave.
She looked for another apartment but could
not find anything affordable. Under Fannie Mae’s new policy, she will
now be allowed to stay.
“I was feeling so nervous,” Ms. Torres
said. “I’ve tried very hard to pay the rent and to pay all my bills,
and it seemed unfair this was happening. I’m very grateful we won’t
have to move.”
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