Today, Fannie Mae announced a new nationwide policy concerning foreclosed homes that are occupied by renters.
The bottom line is this: When Fannie Mae forecloses a property, they will allow renters who may happen to be occupying the property to remain in the property subject to terms of a new lease under management by a real estate broker or management company.
How do you feel about this? Tell us whether you like or dislike this idea, and let us know why:
[poll id="6"]
Thank you for reading RealEstate.BryanEllis.com… please share your thoughts about this issue in the comments area below!
Brian,
When a property owner sells his/her tenant-occupied property, the new owner is subject to the terms and conditions of the previous owner’s lease, until that lease expires. Which seems fair to the tenant to me. Why shouldn’t this also apply to FNMA or a bank or whoever?…regardless of whether the transfer was by voluntary sale or forced sale (foreclosure)?
I say the only fair thing to the tenant is to let them have SOME kind of continuing lease agreement, at least for the remainder of their original lease term. After all, they can’t help it if they’re landlord didn’t/couldn’t pay the notes.
Thanks for a thought-provoking survey!
…jp
I think that Fannie Mae should give the Renter sufficient notice and a time frame of maximum 90 days for them to find another place where to live while continuing to market the property for sell. Exemptions should be made in the case of eldery, disable and infants for additional extensions.
Wow…hold on to your horses here,
It’s one of the best ideas they came up with, Tenants don’t nhave to move and spend a ton of time and money trying to get into another place, The new lease can work two ways, in favor if the lease goes down or viceversa if it goes up.
Now how does it affect investors? it’s an upside because you now have a cashflowing property for a 30% to 50% discount, so you can hold it which now it’s the best time to build your portfolio 75% multifamily, 25% single family or you can flip it or lease option it to another investor for great money,
Talking about win win for everybody including the tenants who are getting screwd right now!
Fabio Nunez
I think its great. Win-win situations make the world go round, especially in residential real estate. Everyone needs a secure roof over their heads.
I’ll have to agree with JP and Fabio and reloanpro. To throw a renter out of the place they have been living in for who knows how long is just ridiculous. Especially if the renters are good paying renters. It only makes sense for FNMA to have some cash flow from these foreclosed properties. At least until a buyer can be found and doesn’t mind having a cash positive property from the start.
Bryan, thanks for the poll and the opportunity to comment on the idea. I see the Noes are barely ahead at the moment.
It is a terrible idea.
The poll question,”Should Fannie Mae Allow Renters To Continue Occupation Of Foreclosed Properties?” is a bit of a logical fallacy commonly known as a “loaded question”. A better question might be whether Fannie Mae should continue to have any long term role in the US housing market.
No matter how good it makes one feel to protect a renter involved in a foreclosure you need to ask yourself, “with Fannie Mae’s incompetence WHY would you want them to be the ones to manage “helping” renters?”. Personally, I would not.
More Government is rarely the solution and usually contributes to the problem. If you see a debacle and assume it was created by free markets often you need to look much closer. Truly free markets would not let you do extremely risky things such as build a mansion on the location that was commonly visited by mudslides nor build a home under sea level in a location commonly visited by hurricanes WITHOUT paying sky high insurance or possibly not even being able to even find a private insurer to cover the home. We have nothing approaching free markets in the U.S. as no one wants to be responsible for themselves. Some RE investors want to see these victimized renters “protected” by the same GSE, Fannie Mae, that played a major role in helping to create their (and many other’s) pain. How can one believe this is a solution for these renters (or anyone else)?
Partial deregulation got us where we are today free markets are merely a convenient and easy scapegoat for some.
Maybe even good ideas should be implemented and managed by competent non-criminals.
From what I have seen there is a lot of talk about how to fix this housing market but little about putting the criminals that actually caused it harm (for their profit) on trial. If they aren’t caught and punished aren’t we just setting ourselves up for another round of stupidity?
Did we truly benefit from one of the highest levels of homeownership, by percentage, in the world? Is sure looked like a good path to many at the time. The law of unintended consequences can bite one hard. I am not so sure it is wise to hand off a chunk of the rental market to the same government that has killed us with artificial and unsustainable high levels of homeownership.
Right to health care
Right to a secure roof over your head
Right to education
Right to a job
Right to privacy
Right to fill-in-the-blank__________
I can’t find any of these “rights” in the Constitution which should be THE law to address rights. If we create rights out of thin air (even if the courts back them) we need to be prepared for the law of unintended consequences. Free housing, for example, might be worth about what you pay for it. It would also tend to squeeze out of the market better alternatives or even any alternatives.
I would like to see some better suggestions on dealing with the “foreclosure renters” and foreclosures in general with an eye toward correcting and preventing the mistakes of the past.
Enron/Worldcom inspired legislation, “Public Company Accounting Reform and Investor Protection Act of 2002″ commonly called Sarbanes-Oxley, did NOT prevent the harmful actions of AIG/Lehman Brothers/Bear Stearns to their shareholders (not to mention the U.S. economy) a mere 6 years later but was a burden on business and cost to consumers. We need solutions that actually work not just “feel-good” legislation and make-work for accountants, lawyers, and GSEs.
–
“The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’” -Ronald Reagan
“You can’t fix stupid” – Ron White
This is a difficult one for me in some ways. It seems to me there are thee sides to this: Legal, Practical and Political.
On the one hand, there’s the legal question. JP says that when a property is foreclosed, that the lease transfers to the new owner (the lender). I’m not an attorney, so I don’t know for sure. I know that when a property is sold that the obligations of the property transfer with the property. On the other hand, in a foreclosure, all property encumbrances that are junior to the foreclosing mortgage are released from the property, and it seems this would include the lease. But realistically, landlords can always find a way to evict tenants subsequent to transfer of property ownership, and particularly subsequent to foreclosure.
On the practical side, it seems a good idea for Fannie Mae to collect some rent for these properties subsequent to foreclosure.
But on the policy side, there are two huge problems. The first one is that the Constitution gives no indication that the US Government is authorized to be involved in the property management business. I’m sorry, it just doesn’t. And the bigger problem is this: Fannie Mae’s solution assumes, just like always, that the government is the best solution to the problem. I have to believe that there are any number of better solutions that involve proven real estate investors who actually understand the property leasing business. Here’s one I just worked up: Why doesn’t Fannie Mae offer to allow investors who have existing PERFORMING INVESTMENT LOANS (and therefore proven track records) the option to take over these loans? Make the deal sweet by modifying the mortgage, and include the tenants as a bonus. I suspect this would be EXTREMELY attractive to many landlords. And this doesn’t involve Uncle Sam staying involved as a property manager.
Government involvement in the private sector is a bad idea. Period.
Bryan Ellis
RTC1 – necessitated by our government.
RTC2 – being necessitated by our government.
There will not be a RTC3 if we keep going down the path of nationalization as the cure for all these government precipitated problems.
Dang, a future RTC3 would actually be the lesser of two evils.
The endless examples of our government’s failures in assuming the role of free-markets proves that highly imperfect free-markets are much preferred unless you believe cradle-to-grave care is a desirable role for our government. If you do, please do us “true-believers” the honest courtesy of eliminating the Constitution through legal means. You probably already have the votes in our de-facto democracy.
It is not surprising that only a few in the U.S. want to follow the law of the land. Every national election makes that clear as almost every candidate on the ballot seems to know better than the Constitution and won’t let the silly old law get in the way of their “solving” the peoples problems.
Government tax incentives might be a temporary way to entice investors into picking up these over-leveraged homes & keeping some tenants in these homes. Of course a certain number of them likely should have been evicted long ago but the landlord probably preferred a bad tenant to an even more negative cash-flow.
I am sure much sharper minds than mine can come up with minimal government-involvement solutions that don’t create more government bureaucracy to deal with their self-created problems.
RE problems are real opportunities for investors. We need to be able to play the game well to benefit. I am not willing to encourage the government to create unlimited RE opportunities (problems) for us at a high cost to our country. I suppose that might disqualify me as a “greedy capitalist”.
I don’t like it because it’s not on the same playing field an investor would have to face if the investor decided to purchase the property, the investor would have a down payment, the investor would have to qualify for the loan, the investor would have to seek insurance etc…
Now the goverments going into the RENTAL BUISNESS and they don’t have to play be the same RULES… somethings wrong with this.
I’m sick and tired of politics and what they can do but were suppose to always bend over and take in the A**… bull ****… when are the people going to say this is ENOUGH…
If we the people have a say when do we get to speak on this. If the goverment doesn’t have to put a down payment down, if the goverment doesn’t have to have insurance, if the goverment doesn’t have to qualify for a loan then shouldn’t it be the same for you and I…
After all what percentage of the goverment do we OWN?
How will we as tax payers benefit from this… will we each own percentage and when the property is sold who benefits. Who gets the rent money…is that going to be split up amoung us people.. after all shouldn’t we get a part of that..
I think it’s a very bad idea and I would hope the people would be smart not to get involved with the goverment owning these properties, I’m afraid that if they missed a payment the goverment might send the CIA to waste them out, or they may have some other operative do it and act like nothing took place… you got it… it’s called a COVER UP..
Thank You
Steve Wagner
Caitlyn, that is painfully misguided and simplilstic thinking. Look at any time the government has cut taxes as a simple example of the effect of reducing government involvement. It worked for Kennedy. Worked for Reagan. Even worked for Bush. It’s unfortunate that we can’t look back at the results of any examples of when the government has totally removed itself from a previously socialized function, because it doesn’t happen. That’s why allowing government in the mix to begin with is such a horrible idea. The other place your analysis is utterly ridiculous is suggesting that free market capitalists “have no clearer crystal ball than anyone else”. That’s true, but it’s a statement that is plausible without rationality. Free market capitalism is people doing what they individually think is best. Some will be right, some will be wrong. The cream rises to the top, and everyone else readjusts. But with government solutions, a single approach either works or it doesn’t (and it’s always based on specific agendas such as “soak the rich” or “remember the children” which are code words for political action issues, not human interest efforts), and all of the millions of people who could have probably done something better for themselves and their families (and ultimately their country) never get the chance to do so. With respect, only narrow-visioned foolish audacity suggests what you have. This discussion is much akin to the debate about whether the $700Billion bailout was the right plan. How has that worked out so far? Not well, with no improvement in sight. That’s what we get when politicians think they are qualified to be business people.
Bryan Ellis
I think it just doesn’t matter any more. We will soon have some of the most horrendous laws rammed down our throats by Pelosi, Reid, Schummer, Obama, etc… ever in the history of this country.
They are laughing and giggling behind doors at how the country is in their hands and we will soon see regulations to make us all cry and we will have litttle ability to control any of the situations presented to us.
I say this because the government is becoming the one controlling all aspects of our lives. When they have the Trillion dollar budgets year after year, it will be easy to make that Trillions per year and the plan is quickly becoming just that.
When we have no way to resist the huge increases in taxes that will soon be passed by the government because we need to do something about all the deficit spending we will not be worried about how many squaters there are in foreclosed homes, won’t matter if they are renters or not.
If one wants to look at how well the government will run the rental program involving foreclosed homes just look at how well they have run public project housing. I can hardly wait for the new slums this will grow across the country. Soon to be next to you too, won’t matter where you live it will happen just give it 4 more years.
I live in a pretty nice are in Arizona. I have been doing a lot of looking around recently and I have found some interesting things. You can drive down the street and find a number of foreclosed homes for sale and these are nice middle to upper middle class nieghborhoods but it is what you don’t see that has been very educational. While there are lots of homes listed and for sale and they match the listings posted online what else I have been finding is the real scary part.
There are large numbers of homes with no one in them and they are not listed with anyone for sale. They are just sitting not adding to the tax roles, HOA or anything else. Many are REO’s that have been listed and listed again and have just plain fallen off the listings to the point that the bank is not doing anything at all with them.
They have become hidden from view. They haven’t even been able to auction them. Some time sooner or later these house will be too big a drain and then what is going to happen?
A few of these areas are starting to show signs of failing from the stress of debt on the home owners. Some of the HOA’s are starting to show signs of failing. It is not happy times around the corner.
We are not in a depression yet!! If we continue to lose control of the government or just plain give our control away to a gigantic bailout plan that is doomed before it starts we soon will be.
So should the government run rental housing or not? It soon won’t matter if we follow some of the policies being proposed that are destined to crush our economy.
The bailouts given to the banks haven’t helped and won’t help in the future. The banks have just used the money to buy others banks. We are in a lot of trouble and as a country we will survive but it is not going to be pretty with all the new regulations that will soon be rammed down our throats.
We are here because of too many stupid and bad regulations imposed by several very greedy politicions over the last 30 years, more regulations by the same idiots won’t help.
Chris B