What Happens If You Rent & Your Home Is Foreclosed?

Fannie Mae Announces New Policy for Renters in REO Properties
for-rent

Recently,  Fannie Mae released an announcement describing a new policy that will allow qualified renters to remain in Fannie Mae-owned foreclosure properties. Formally known as the National Real Estate Owned Rental Policy, it is meant to address the difficulties faced by tenants who – often through no fault of their own – face serious disruptions in their lives because the owner of the property in which they live has been foreclosed upon.

Renters in properties owned by Fannie Mae will be able to stay in their homes after the foreclosure. Note: this applies only to renters in the property at the time of the foreclosure. It does not apply to the borrowers who lost the home or any of their immediate relatives.

Any  type of property  can qualify: single-family homes, condos, co-ops, manufactured housing, or one-to-four unit buildings.

Key features of the new policy are

  • After the foreclosure is complete, renters will be offered the opportunity to either accept an incentive payment to vacate the property (“Cash for Keys”) or they may sign a new month-to-month rental agreement with Fannie Mae.
  • Fannie Mae will not require payment histories or credit checks.
  • Renters will be charged market rents. This means renters may have to pay higher rents.
  • No security deposit will be required. Nothing is said about the former landlord’s possibly unreturned security deposit.
  • The property will be for sale, and may undergo repair or rehab work, during the term of the tenancy. Tenants must cooperate with the sale.
  • If the property sells, the lease will transfer to the new owner who may decide to occupy himself.
  • The property will be managed by a real estate broker and/or a property management company.

Under this plan, tenants, many of whom are not aware their home is even in foreclosure,  are not forced out into the street. But, all leases will be month-to-month, meaning tenants may have to move within 30 days of a sale.

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10 thoughts on “What Happens If You Rent & Your Home Is Foreclosed?

  1. Oops-correction to post. She said she was a certified FDIC appraisor NOT FHA. Does that mean she is coming for the bank that is about to foreclose on this house? I ask her if she was an REO agent and she said she was not. Like I said I need through this once before, but an REO agent came out. This was an appraisor that took pictures of the inside of my house. What is happening???

  2. I am under the impression that the reason this owners properties are not getting any shortsale approvals is because he is an investor. His properties are rented out. They are not his primary place of residence or something. He has 10+ rentals. This is what my realtor friend in church told me may be happening. She is some kind of distress expert but is on vacation in Hawaii for a month so I have no one to turn to for advices. I do not think the property managers are being upfront with me and the realtor never returns my calls. please help.

    • That’s not right. It doesn’t matter if it’s a rental or not. If it’s a decent property and it’s priced right, it should sell immediately. We have tons of foreclosures here and my listings and everyone who knows what they are doing gets multiple offers within two weeks of listing. That way the agent has an offer and a backup or two. You could call the realtor as a buyer and find out if it’s still available or if he has offres. That’s a common question. Once the property is in process with the bank, it often takes a long time, months.

  3. I am in NV and here if the owner rents the property he can manage it himself. He can also hire a regular real estate agent to place it in the MLS to advertise it for rent and then the owner can manage it himself. But a real estate agent that manages property MUST have a property management license here. This is my situation. I was previously in a rental that gave me cash for keys so I know that story. I went to my property management company today and told them the FHA appraisor came out. She said she was a licensed FHA appraisor. The property managers/agent said they had no idea she was coming or what she was doing there. This house I am renting is also listed as a shortsale but there is no offer on it. I know from prior experience that the property managers first obligation is to the landlord- is what they told me. I am worried it is about to get foreclosed upon and I am going to get evicted again by the bank. You say in your original post that banks are now renting out properties? If this house gets foreclosed on will they offer me cash for keys again or will they let me continue my lease? What is this new program or law and does it affect all rentals?

    • In California, the new owner/bank must offer you at least 60 days or 90 days of rental. If you are in Vegas, there are so many foreclosed homes there, the bank may be happy to have you stay on longer, but that will depend on the bank.

  4. Wouldn’t Fannie May have to hire licensed property managers to manage the properties? I am currently renting a home that is listed as a shortsale by a REALTOR who does not have a property management license, he just did a courtesy rental listing for the owner. The owner owns app 10 other properties-an investor.None of his shortsales are getting approved. They are all becoming REO listings by other agents. Are you saying since I have a lease in this property the bank will not evict? A FDIC Appraisor just came by today- what does that mean??

    • I don’t know what state you are in, but most states I am aware of [especially CA] do not require a license to manage property, particularly if owned by an individual who can manage his own properties. Real estate agents can list and rent out property for others. Are you saying none of the investor’s short sales are being approved or the Realtor’s? These sales are very difficult and take a long time. That’s why a short sale specialist, such as myself, agents who have made special efforts to educate themselves about the process, is needed.
      If your home is foreclosed upon, typically after a month or so, someone will appear, perhaps the REO agent and ask if you want to stay and rent the property or take a cash settlement to move out [“cash for keys”]. Usually just before and also after foeclosing on a home, the bank does have several appraisals done to check the current condiion and value of the home. I don’t know why anyone from FDIC would be involved–that is the federal agency which guarantees bank deposits.

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