Fannie Mae To Halt Evicting Renters Of Foreclosed Homes

Fannie Mae is finalizing a national policy that will allow tenants to remain in their homes even if their landlord goes into foreclosure.

The policy will be in effect Jan. 9th and reflects growing pressure on the mortgage company from a legal-aid group that threatened to sue over recent evictions. The company said it will also ensure its current holiday moratorium on new evictions is being followed until the new policy takes effect.

In late November Fannie Mae and Freddie Mac said they would suspend tenant evictions temporarily during the year-end holidays. But despite the pledge, Fannie Mae was proceeding with more than a dozen new eviction cases in Connecticut.

Freddie Mac hasn't announced a similar policy reversal, though a spokesperson said they are "currently evaluating additional actions."

The decision by Fannie and Freddie represents just a slice of the market and excludes many properties purchased with riskier loans that are now falling into foreclosure. Fannie Mae and Freddie Mac, however, are uniquely structured to be able to address the issue, which effectively now has them acting as a type of landlord or property-management company to administer month-to-month leases to renters of their foreclosed properties.

Ted Meyer, a spokesman for Deutsche Bank, one of the biggest trustees of mortgage-backed securities, said Deutsche Bank has no capacity to intervene, saying "the whole issue comes down to ownership" of the foreclosed properties. A given property "is held in trust by us but it is effectively owned by the hundreds or thousands of people that own a tiny sliver of mortgages in any one pool," Mr. Meyer said.

It might fall to the local servicers of the mortgages to decide to halt evictions, he added, because they are responsible for steps such as hiring real-estate agents to put foreclosed properties on the market. It isn't clear how much power -- or will -- a servicing company has to effect a moratorium on tenant evictions.

A New York University study found at least 15,000 renter households in New York City were affected by foreclosure last year. Since then, the number likely has increased Courtesy WSJ.