Fannie Mae has finally taken measures to protect tenants.
Renters who are faithfully paying their dues to landlords but are now on the verge of losing their places because of foreclosure are finally protected against eviction. Aaron Smith of CNNMoney.com reports that new leases will be offered to tenants starting January 9. It will guarantee renters their places even if the landlord has failed to pay his mortgage. Freddie Mac on the other hand, is set to pass the same policy in the coming weeks.
From our earlier post about tenant rights, this policy from Fannie Mae could relieve thousands of tenants who are not covered by state laws protecting them against unjust eviction. It has been a perennial problem but this year’s crisis has brought about thousands of complaints against landlords who failed to fulfill their duty of informing tenants about their unit’s situation.
A surprising part of the report however, may dash the hopes of other renters as it is unclear whether the banking industry would adopt similar changes to its mortgage lending policies to protect responsible renters. Tom Kelly, spokesman for JPMorgan Chase (JPM, Fortune 500), said his company did not have any immediate plans to mimic the Fannie Mae policy.
There are some reasons why banks may likely put off such measures. First, banks may lose their absolute claims over properties since tenants will still be allowed to stay even if the property can be more profitable for other purposes. Second, it would constitute more paperwork since banks will be dealing with more persons for a single property instead of one landlord. More transactions mean more costs. Lastly, banks will insist that eventually such property will still fall into foreclosure due to its mortgage condition even with the new lease. The GSEs can afford such program since its purpose is “ideally” not-for-profit. In the end, banks will still likely oppose such move unless one large institution gives in and causes others to have no choice but to do the same in the name of competition in the free markets.