Renters don’t be affraid if the property your living in is foreclosing. Fannie Mae has a new renters policy in effect, which will help those renters.
Fannie Mae’s National REO Rental Policy
This policy provides the opportunity for qualified renters to stay in Fannie Mae-owned foreclosed properties. The policy extends to those in apartments, single-family homes, two-to-four unit properties, condos, co-ops and manufactured housing. However, properties must meet applicable state laws and local code requirements.
To stay in the property, renters must sign a new month-to-month lease (no security deposit is necessary). New leases will be for market-rate rent determined using local comparable rents and other resources. Rent control restrictions and Section 8 remain in effect. Fannie Mae will attempt to work with renters who would have to pay higher rent under these terms to make accommodations.
If renters do not wish to remain in the property, they will be offered relocation assistance, which is typically about one month’s worth of rent. Though, the relocation assistance may be higher in high-cost housing markets.
Freddie Mac’s REO Rental Initiative
This program is open to both renters and former owners who occupy foreclosed Freddie Mac-owned properties. Both receive the option to sign a month-to-month lease with Freddie Mac once the foreclosure is complete (no security deposit is necessary). The local property manager determines the monthly rental amount based on other rents in the market and rent control and Section 8 housing is honored. Income verification is required to qualify and those who do not qualify or those who do not wish to remain in the property are offered relocation assistance.
Properties must meet applicable state and local property codes and tenants must allow sales agents to show the property to potential buyers. This means tenants may experience disruptions from showings with or without warning. In addition, both programs require that tenants must be prepared to move out if the property is sold.
Overall, both programs offer a softer landing for renters caught up in a foreclosure situation, but not all foreclosed properties are owned by Fannie Mae and Freddie Mac. Some states and localities also provide protection for tenants from immediate eviction, but many are still vulnerable to it. As a result, congressional legislation is in the works to require a 90-day notice be given prior to eviction. The bill, which has been introduced, but not yet voted on, would allow renters to live out the terms of their leases.
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