Fannie Mae Announces New Policy for Renters in REO Properties
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.