Fannie Mae Gets Into The Home Rental Business
Good News for foreclosure victims
Some homeowners will get an option to rent the home that they just lost. Its possible to stay in your home as a renter. Fannie Mae will give borrowers facing foreclosure an option to rent their homes for a year. Foreclosed home owners will be able to sign a one year lease, with possible month to month extensions with Fannie Mae. Good for everybody.
Homeowners get a little relief and are able to remain in their homes for a year or more. This will buy them the time they need to regroup. It will also help keep neighborhoods from going missing. Rather than rows of abandoned homes with all the crime and destruction that vandals create.. Neighbors that have not lost their homes will not see more equity loss as squatters and criminals move into vacant homes. The banks are reluctant landlords and they are allowing property to decline.
It will keep supply off the market for at least another year and that is good for all the handlers, Fanne Mae because it can put off the expense of a foreclosure, the banks because less supply will protect equity in homes they are off loading and everyone one because it will help stabilize home prices. I dont think we can have a strong recovery without real estate.
To qualify, homeowners have to live in the home as the primary residence and prove that they can afford the market rent, which will be established by the management company running the program. In many cases, rents will be less than the mortgage because properties that are now worth far less than they originally paid.
The downside is seems to be that homes that might normally have been foreclosed and sold will now remain owned by taxpayers. Homes, according to Dr Shiller have risen faster in the last few months than he has ever seen. Perhaps Fannie will profit a little while doing a good thing for families that must be a little traumatized by it all. And even if prices don't rebound quickly. Fannie Mae gets rental income, avoids foreclosure expenses gets to helps people.
Thanks for Reading
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Comments (6)
Jim Wineinger, over 14 years ago
Sorry to have missed your reply Howard. But there are several technical discrepancies in those statements. First renters must live in forclosed properties at the time Fannie Mae acquires the property. This to me would mean that Fannie Mae foreclosed on the property and then is allowing the renter to stay and pay them which is good except that Fannie does not own the loans, it insures the loans. The Banks own the loans and must foreclose the loans and they are the ones who are kicking the renters out in order to sell it as an REO. When none of this happens the property then goes to Fannie when they pay off on the insurance claim. It is then that Fannie acquires the property. If the renter was allowed to stay through this process, this will be a good thing for the renter and would mean that Fannie could recoop some of their insurance losses through the rental income which would move Fannie from an insurer to an landlord or investment owner which is not in the Charter. The next statement says "Any single-family property is eligible including two- to four-unit properties, condos, co-ops, single-family detached homes and manufactured housing" I did not realize that a two-to four-unit property could be called a single-family property!!! These are really multi-family properties. According to the Charters of organization the government entities are not investors. This is where a court will/may decide that Fannie overstepped its bounds and their policies are inconsistant with their charter and therefore illegal even though it seems to be in everyones best interest. And before they allow it they will require a change in the Charter. I fear this may be the next battle area for those against big government as I saw the similar thing happen in a local city here where they violated their Charter (even though it was in the cities best interest) and the courts reversed the laws and required special elections to replace all commissioners affected by the repealed laws. Dont get me worng, I do applaud the attempt here. But am afraid they are showing that they are not a part of the realestate world by their wording, they are indeed a part of the financial world, and it could pose them a problem.
Jim Wineinger, over 14 years ago
Hi Jim Direct from the site is the following: > To qualify, renters must live in foreclosed properties at the time Fannie Mae acquires the property. Any single-family property is eligible including two- to four-unit properties, condos, co-ops, single-family detached homes and manufactured housing > Renters live in more than 20 percent of all properties facing foreclosure. They may pay their rent on time but still risk eviction if the property goes into foreclosure. To help minimize disruption to good tenants, Fannie Mae now allows them to stay in their homes with a month-to-month lease. The policy, which applies to properties owned by Fannie Mae, will help bring stability to communities affected by high foreclosure rates. Sorry to get back to you so late.... But thanks for helping to clarify this. Howard
Howard Sobel, over 14 years ago
Sorry Howard, but the last half of your statement does not apply. They are talking about homeowners foreclosed upon being allowed to rent their own home and thus become renters, Not renters who have been good tennants being allowed to stay. That is another discussion and the new homeowner, when the property is sold, would be glad to have such tennants.______The real thing being done is keeping the supply of available houses relatively low and thus keeping the prices from falling like they would if all those homes were on the market like they should be. This is where all those missing foreclosure homes are.
Jim Wineinger, over 14 years ago
You are astute, Jim. It is short term. I think the Govt is buying a year, getting some rental cash flow and hoping they can sell at a better price later. Its a kinder way to deal with foreclosure victims - those renters that paid on time and were good tenants.
Howard Sobel, over 14 years ago
About the only ones it is really good for is the Property managers. They will benefit long term, while investors have to fight over the artifically reduced supply. They will not pay too much for any home (real investors) and thus those released to the market will either be bought at a lower price by those investors or at too high of a price by the unsavvy investors who can not turn them and take a big loss when forced to sell, or actually become a foreclosure statistic themselves!!!!!! This is a short term solution that can only reduce prices when the market forces are allowed to stabilize things themselves with regular supply and demand.
Jim Wineinger, over 14 years ago