Freddie Mac To Start Leasing Foreclosed Homes

Freddie Mac will begin offering leases to renters who face eviction as the result of foreclosure, the company announced Friday. The mortgage-finance company will also suspend through February all evictions of non-owner tenants in homes repossessed by the McLean, Va.-based company.

The policy follows a similar effort that Fannie Mae instituted earlier this month and that effectively turns the largest holders of American-home mortgages into big landlords, as well. Both programs will offer month-to-month leases at market rent to tenants whose landlords have lost the homes to foreclosure.

The policies are an about face from previous practice when lenders and mortgage companies would routinely evict tenants in homes that fell into foreclosure, even when the tenants were current on their rent. The government-finance giants have been under pressure from affordable housing advocates to take more steps to avoid tenant evictions.

Tenant advocacy groups have called on private lenders to follow suit, arguing that tenants have been inadvertently swept up in the foreclosure crisis. Lenders should “not be kicking a tenant out in the middle of a recession who has upheld all the terms of their rental agreement,” says Jim Carr, operating chief of the National Community Reinvestment Coalition. “It represents a really important and good faith effort not to compound the misery of these families.”

Fannie and Freddie will rely on property managers and some real estate agents to collect rents and provide maintenance for the homes.

Freddie Mac’s decision to offer leases to renters could allow 4,500 to avoid eviction, according to New Haven Legal Assistance. Fannie Mae estimates that 7,000 to 10,000 renters may choose to sign month-to-month leases and remain in their homes.

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