Fannie Mae Lets Foreclosed Tenants Stay-No Payday Loans Needed

People losing their homes to foreclosure won’t need payday loans to stay in their homes through the holidays. According to Sunday’s Wall Street Journal, Fannie Mae announced that it will allow tenants low on extra cash to remain in their residences should the building’s landlord go into foreclosure, and that they will not evict tenants during the year-end holiday season.

Advocacy Group pressures Fannie Mae and Freddie Mac

This announcement came after the government-controlled mortgage finance company came under pressure from a legal-aid group that threatened to file suit over recent evictions in Connecticut.

In late November, both Fannie Mae and Freddie Mac pledged that they would suspend tenant evictions temporarily during the year-end holidays. However, New Haven Legal Assistance said that despite the pledge, Fannie Mae had proceeded with more than a dozen new eviction cases in Connecticut. The advocacy group said the evictions would violate legislation passed earlier this year – to rescue the two mortgage finance giants – that required them “to permit bona fide tenants who are current on their rent to remain in their homes under the terms of their lease”. This would keep people from turning desperately toward payday loans.

Fannie Mae now plans to act as a type of landlord, or property management Company. They intend to sign new leases with renters living in foreclosed properties owned by the Company. Freddie Mac has not announced a similar pledge or policy reversal however a spokesperson said they are “currently evaluating additional actions.”

Thousands affected by foreclosure.

With regards to landlord foreclosures, last year a New York University conducted a study and concluded that at least 15,000 New York renter households had been affected by foreclosure. It is safe to say that the number of foreclosures has increased since that study was conducted. So have the number of people taking out payday loans. In response to these landlord foreclosures, a group of Harvard University students have been going door to door in the Boston area and notifying tenants of their rights in an eviction. Many tenants are unaware of their rights and accept “cash for keys” offers from lenders to vacate. This amount is typically between $500 to $1000 US dollars.

Cash for keys.

Chauntay Barnes knows all to well about “cash for keys.” In November of 2007, she moved into a single-family home with her two kids on a quiet street in Hamden, Connecticut. She told the Wall Street Journal that she never missed a payment and was recently shocked to find an eviction notice in her mailbox. Her landlord had defaulted on his mortgage payments, and the property was now owned by Fannie Mae. She tells the Journal that one day, “A guy came by from Fannie Mae offering me cash for keys,” she said, referring to his offer of $1,000 for her to leave the property. I would have taken it but it just wasn’t enough,” she said.

Attorney’s advise homeowners to stay put.

Scared, confused and low on extra cash, she may have thought of turning to payday loans but instead turned to her local legal aid office, New Haven Legal Assistance, where attorney Amy Marx told her to stay put and go through the court system, which would give her the maximum time under law to look for a new place. “We have seen the devastating impacts of Fannie Mae offering cash for keys to tenants and evicting most of the rest,” attorney Amy Marx of New Haven Legal Assistance, said. “We eagerly await the implementation of the new policies.” The Wall Street Journal reports that Fannie Mae could not be reached for comment.