Fannie Mae is Addressing the Foreclosure Problem by Offering Help to Renters

January 23rd, 2009 | Tags: Foreclosure Crisis

A revamped Fannie Mae under a new management is addressing the foreclosure related problems by offering help to the renters. It is offering a safety net by disallowing the eviction of tenants whose landlords have been foreclosed upon.

On Tuesday 13th January this year, Fannie Mae spoke about a new measure it is undertaking that will allow the renters of foreclosed houses to ink new leases with the mortgage giant while the estate is set up for sale. Alternatively they will be given financial assistance to shift to new quarters. The tenants will be told to pay the current market rent rate under the fresh lease terms.

David M. Moffett the CEO of Freddie Mac said that the company was keen to bring down the numbers of foreclosures so as to make the housing market turn around. Michael Williams the CEO of Freddie Mac said, “Renters in foreclosed properties have often been a casualty of the foreclosure crisis the country is facing. This policy will allow qualified renters to remain in Fannie Mae-owned properties should they choose to do so, mitigate the disruption of personal lives that foreclosures can cause, and help bring a measure of stability to communities impacted by high foreclosure rates.”

In response the shares of Fannie Mae jumped by 4.2%. It was the same with Freddie Mac. The latter mortgage firm announced that it was working along similar lines.

In the previous week Fannie Mae and Freddie Mac said that they would extend freeze on foreclosures till the end of this month of January. Previously it was set to expire on 9th January. By doing so they hope that the borrowers will get time to work out viable affordable modification of defaulting loans.

Jointly Fannie Mae and Freddie Mac either own or guarantee nearly half the outstanding home loan debts in the country.

In the previous week Citigroup agreed to give support to a legislation to prevent foreclosures. The hope is that other mortgage lenders will take up this lead. The new law will help to stabilize the real estate market as well as the economy. The bank plans to contact about 500,000 borrowers who have not become delinquent borrowers to find out if any of them are having problems with the mortgages. The focus will be on the areas worst affected by foreclosures and increasing unemployment.