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Fannie, Freddie Put Off Evictions until March

Moratorium applies to owners and renters in single-family homes

By Mark Huffman
ConsumerAffairs.com

January 30, 2009

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The moratorium on evicting residents from foreclosed properties -- put in place by Fannie Mae and Freddie Mac in late 2008 -- has been extended until March.

The suspension applies to all single-family properties including owner-occupied properties that have been foreclosed upon as well as foreclosed properties occupied by renters.

Fannie Mae this month began implementing its National Real Estate Owned (REO) Rental Policy that allows qualified renters in Fannie Mae-owned foreclosed properties to stay in their homes. The new policy applies to renters occupying any type of single-family foreclosed properties at the time Fannie Mae acquires the property.

Eligible renters will be offered a new month-to-month lease with Fannie Mae or financial assistance for their transition to new housing should they choose to vacate the property. The properties must meet state laws and local code requirements for a rental property. On behalf of the company, property managers are contacting renters in Fannie Mae-owned foreclosed properties to notify them of their options.

Renters in Fannie Mae-owned properties can call 1-800-7-FANNIE for further information about their options.

Freddie Mac instituted a similar policy.

"First and foremost, Freddie Mac's REO Rental Option is intended to help cushion the impact of foreclosure on families who own or rent homes with Freddie Mac-owned mortgages," said David M. Moffett, Chief Executive Officer of Freddie Mac. "At the same time keeping foreclosed properties occupied and in better repair will support local property values and promote a faster recovery in the housing market."

Under the REO Rental Option, leases will be offered to current renters on a month-to-month basis at market rents or the rent amount they were paying prior to foreclosure, whichever is less. The rent for former owner-occupants will be the market rent, which will determined by the property management firm Freddie Mac contracted to manage the program.

To qualify, current tenants and former owner-occupants must be able to demonstrate they have adequate income to pay the monthly rental amount. The home must also meet applicable building codes, or can be affordably brought into compliance, to be eligible.

Freddie Mac will also explore loan modification options that may enable owner-occupants to retain ownership of their homes by reinstating their mortgage with modified terms.

"In about half of all foreclosure sales there is no conversation between the borrower and the mortgage servicer about workouts. Before starting the eviction process, we want to ensure there is one last effort to achieve a workout," said Ingrid Beckles, Senior Vice President of Default Asset Management at Freddie Mac.

In 2008 Freddie Mac approved more than 87,485 workouts, enabling three out of five of its seriously delinquent borrowers to avoid foreclosure.

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