WASHINGTON – Jan. 30, 2009 – Freddie Mac today plans to announce a first-of-a-kind plan that lets homeowners and tenants temporarily stay in homes in foreclosure by renting them back, an effort to stop many of the sudden evictions that have come along with the housing crisis.
The program will let thousands of qualified former homeowners, as well as families renting from landlords, enter into a monthly lease on their homes after Freddie Mac has acquired them through foreclosure.
Freddie Mac officials expect the program to help about 8,600 families in 2009.
The program gives homeowners and renters more time to find a new place to live and also keeps homes occupied. That’s a plus for neighborhoods where numerous foreclosures have led to empty, unmaintained, vandalized properties.
“For tenants, it’s a big difference,” says Mark Zandi, an economist with Moody’s Economy.com. “If this acts as a benchmark for other mortgage servicers, it would be a very positive development. It’s a win-win. “
Details of the program:
- Leases will be on a month-to-month basis.
- Tenants and homeowners will only have to pay market-value or existing lease rents, not the mortgage payments. Freddie Mac will hire a property management company to determine that amount.
- Tenants and homeowners must be able to show proof that they have enough income to pay the monthly rental amount.
- Freddie Mac will also explore loan-modification options that might be available for some borrowers.
The Freddie Mac initiative comes as the government is stepping up efforts to stem a wave of foreclosures that caught more than 2.3 million homeowners last year, up 81 percent from 2007.
The Obama administration has pledged to spend up to $100 billion to help people avoid losing their homes.
In mid-December, Fannie Mae also rolled out a policy that allows renters in a property that is being foreclosed on to rent that home rather than be evicted. It does not include homeowners. Up to 10,000 families are expected to be helped by Fannie’s rental policy; Freddie expects about a 30 percent acceptance rate.
The Federal Reserve this week announced a policy to help some distressed homeowners avoid foreclosure. The Fed said it would work with companies servicing mortgages now owned by the Fed to modify qualifying mortgages of homeowners that are 60 days or more delinquent on payments.