WASHINGTON – Jan. 14, 2009 – Mortgage finance company Fannie Mae said Tuesday it has adopted a policy allowing renters to remain in their homes even if their landlord enters foreclosure.
The new policy will allow residents of about 4,000 properties to sign new leases with Fannie while the property is up for sale. Michael Williams, Fannie Mae’s chief operating officer, said in a statement that the change should “help bring a measure of stability to communities impacted by high foreclosure rates.”
Fannie Mae had indicated last month that it was planning to do so. Sibling mortgage financier Freddie Mac is working on a similar policy, company spokesman Brad German said.
But Amy Marx, an attorney with New Haven Legal Assistance in Connecticut, said Freddie Mac has not been responsive to requests that it do the same, and has continued with evictions of renters in recent weeks.
“We are thrilled that Fannie Mae has done the right thing,” she said. “Our hope that Freddie Mac will follow their lead.”
New Haven Legal Assistance and two other legal aid organizations in Connecticut represent seven tenants facing eviction on properties whose loans are held by Fannie Mae or Freddie Mac. The legal groups argue that financial bailout legislation passed in October requires the companies allow tenants to remain in their homes.
Some households, Marx said, haven’t been notified of Fannie Mae’s policy change by the real estate agents charged with selling the properties.
Fannie and Freddie said last week they will extend a suspension of foreclosure sales and evictions from single-family homes through the end of January. The companies had suspended foreclosures through the holidays.
The government-controlled home loan giants say the extension will allow borrowers facing foreclosure to keep their homes as they work to modify more loans.
Washington-based Fannie Mae and McLean, Va.-based Freddie Mac own or guarantee around half of the $10.6 trillion in U.S. outstanding home loan debt.
The pair were taken over by the government in September and placed in a conservatorship after mounting mortgage losses put them in distress that was a prelude to the broader financial crisis that hit Wall Street last year.