Renters get foreclosure relief
- Sudden evictions have been rising due to the increase in foreclosures.
- Tenants will still have to be prepared to move if the property sells.
- Some states and localities have laws that offer tenants some protection.
It's every renter's worst nightmare: To move into a home or condominium with affordable rent only to find out that the owner has lost the property in foreclosure. The rent money and security deposit are gone, and chances are good that the bank that now owns the property will evict the tenant even if the rent has been paid.
Such sudden evictions have been on the rise due to the dramatic increase in home foreclosures across the U.S. But some tenants will have other options now that Fannie Mae and Freddie Mac have introduced new programs that let renters (and in Freddie Mac's case, former homeowners) continue to occupy the home after foreclosure.
These rental programs are managed locally by property management firms that Fannie Mae and Freddie Mac have hired to look after -- and typically sell -- their foreclosed properties, which are referred to as "real estate-owned," or "REO." The property managers have been instructed to try to determine whether a home is occupied and, if so, by whom. Once occupancy has been determined, the manager can present the renter (or former homeowner) with options that may include a rental agreement or so-called "cash-for-keys" relocation assistance.
Fannie Mae and Freddie Mac are two of the largest mortgage corporations in the country. Both are now operated under federal government conservatorships.
How Fannie Mae's post-foreclosure rental program worksFannie Mae's National REO Rental Policy is intended to:
- Mitigate the disruption of personal lives that foreclosures can cause.
- Allow qualified renters to remain in Fannie Mae-owned properties, should they choose to do so.
- Help bring a measure of stability to communities impacted by high foreclosure rates.
Details of Fannie Mae program
- Renters must pay a reasonable market-rate rent based on local rents of comparable properties and other factors.
- Rent control and Section 8 will be honored.
- Renters who were paying less than the market-rate rent may be offered some accommodation.
- Rental agreements are month-to-month only.
- Renters who can't afford the market-rate rent or prefer to move out will be offered relocation assistance, typically at least one-month's rent.
- Renters who live in high-cost housing markets may be offered higher sums to move out.
- The program is open only to current renters, not new tenants or former owners of the property.
- No security deposit is required.
- The property must meet state and local rental property codes.
- Renters may call (800) 732-6643 for more information.