Fannie tries to cut renters some slack
When a landlord goes bust, the bank says bye-bye to their tenants. But a new Fannie Mae policy hopes to offer some relief to renters. Dan Grech reports.
The Fannie Mae building in Washington, D.C. (Alex Wong/Getty Images)
More on Housing - Real Estate, America's Financial Crisis
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Tess Vigeland: So we just heard from renters who are having a tough time with that monthly check, but thousands of renters have found themselves kicked to the curb through no fault of their own. They paid the rent in full and on time, but the landlord went into foreclosure.
There aren't many legal protections for renters in that situation, but as of this weekend there is relief -- at least if your landlord's property was backed by Fannie Mae.
It's called the National REO Rental Policy, but as Marketplace's Dan Grech tells us, it's only going to help a limited number of tennants.
Dan Grech: Glenn Saks sold his house at the height of the South Florida real estate boom. He then rented a South Beach bachelor pad.
Glenn Saks: The view was across the intercoastal, Palm Island, Hibiscus Island, right to the downtown skyline, all lit up at night and in the daytime full of jetskis and boats. It really felt like home to me right away.
Saks rented the condo from two sisters. He paid the going rate: $1,600 dollars a month. His first sign of trouble came a few months later.
Saks: One fine day I was notified by security downstairs that there was a woman claiming she could stop my foreclosure for a fee. So my first question naturally was "What foreclosure?"
Banks are required to notify tenants at the beginning of a foreclosure proceeding, which can drag on for months. But the sisters had rented Saks the condo after the proceeding had already begun. Saks found out just 10 days before the hearing.
Saks: It was a feeling of absolute betrayal followed by anger, because theoretically I could have come home and found a writ from the sheriff and had possibly as little as a day to get all my furniture out of the place and make moving arrangements.
For decades, banks have insisted on evicting the tenants in foreclosed properties. They saw renters as a liability. But Fannie Mae, the government-backed mortgage company, is pioneering a new approach. It has suspended all tenant evictions through the end of January and it's allowing tenants to rent the property even after Fannie takes over.
Jason Allnutt: This is just the right thing to do.
Jason Allnutt is a vice president at Fannie Mae.
Allnutt: You have a family who is networked into the neighborhood, into the school system, into the job market, and it's very, very difficult to be wrenched out of that network and put on the street to look for a new place to live.
This new policy of no tenant evictions only applies to properties with mortgages owned by Fannie Mae. That's less than 10 percent of all foreclosures. For everyone else, the old rules apply.
So how do you figure out if you're a Fannie Mae renter? Allnutt says foreclosure notices should include the name and phone number of the bank's attorney.
Allnutt: If you call that attorney and say, "Is this a Fannie Mae home?," I will make sure that those attorneys are ready to receive those phone calls and ready to help those folks who are renters in these properties transition from that foreclosure into a new lease.
Allnutt says Fannie Mae has launched a marketing campaign informing attorneys of the new policy. Eventually, he says the company will set up a hotline for renters.
Allnutt hopes Fannie Mae's no-eviction policy will be adopted by private banks that hold the lion's share of mortgages like JPMorgan Chase and Bank of America.
Miami real estate attorney Karl Klein says Fannie Mae could lead other banks to rethink how they handle tenants.
Karl Klein: Banks don't want to be owners, they don't want to be landlords, but I think that the Fannie Mae program will help show banks that occupied units have less crime, stay in better repair and of course, there will be an income stream coming in.
Glenn Saks rented his bachelor pad long before these new protections were in place, but he was well prepared for his foreclosure drama: Saks is a real estate attorney.
Saks: I filed an emergency motion representing myself to request that the sale be postponed just long enough so that I could move out.
Saks ended up moving into another unit in the same building.
In Miami, I'm Dan Grech for Marketplace Money.
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