Fannie Mae Should Steer Clear of Renting Homes

Making the rounds is a proposal that the GSE’s will not evict renters from properties on which they foreclose. How do they intend to manage this process? This has disaster written all over it. Here are a few observations:

• The rental contract exists between the owner of the property and the tenant. If one of the GSE’s forecloses, that contract is null and void. How do they intend to execute a new contract? Execute a new lease or simply assume the existing lease is in full force and effect? If it is the latter, I suggest the courts will have a field day.
• Who is going to collect tens of thousands or rental payments from all of these tenants?
• How do the GSE’s plan on collecting past due rents?
• Who will handle the eviction process when tenants fail to pay?
• How do they plan to handle the maintenance issues?
• In the event a tenant moves will they release the property?
• Have they considered the difficulties of selling a property occupied by a renter?
• In the event of a sale, who will be responsible for evicting the existing tenant?
• How will a mortgage underwriter evaluate a property being purchased by a prospective owner-occupant that is occupied by a renter?
• Who is responsible for malicious damage when a Fannie (FNM) house is sold and the renter takes their frustration out on the property? Who would want to take that risk?
• Has anyone thought about how the professional renters are going to game this system?

I know this a feel good proposal and I also recognize that there are a lot of people suffering hardships as a result of the mortgage and housing crises. At the same time, you can’t cure every problem The proposed solution to this particular issue needs some thought. We really do have to quit bouncing off walls and consider the consequences of our actions.

More information at the New York Times.

Comments

[User 319909:]

1) They could simply have the leases become month-to-month oral leases
2) Past due rent accrued with the new landlord can be colleccted by property managers
3) Evictions will be handled by the banks/lenders, as they are now.
4) The banks are already obligated to keep up maintenance, usually this done by property managers/realtors.
5) Tenants can be evicted by the banks/lenders, as they are now.
6) The value of the property with tenants in already will be evaluated in the same way they are now, realtors are starting to realize there is a big market for rental units with tenants in good standing
7) If a renter damages the landlord's property, they can be taken to small claims court
8) How does having a lease allow "professional renters" to game the system? This is not a subsidy, just a creation of a lease with obligations for both sides. The con artists have a field day when the banks evict tenants wholesale from the properties, because they come by making demands on the tenants or even collecting "rent."

2008 Dec 15 11:30 AM

[nitadmin:]

It would wiser for the banks to hire propert managment companies that have experience managing rental proerties. All of these forclosed properties will not be quickly or easily sold anytime soon.

It is best to continue renting homes to their current tenets or if there is no occupents to rent the homes to new tenets as soon as possible.

This will generate income will the banks as they wait for the economy to improve and buyers to return.

Another very important issue that you have over looked is that banks will lose even more money if an unoccuppied home becomes occupied by squanters or if people in neighborhood ransack the property and remove or strip valuable parts from the homes. Already this is happening in neighborhoods where forclosures has hit hard. In these neighborhoods, you will see homes stripped of their pipes, plumbing, bathrooms, showers, bath tubs, tiolets, heating, biolers, lighting, and anything of value that you think of, Thieves have stolen from forclosed and abandoned homes in daylight and in front of new camaras. This beahvor will devalue not just the forclosed homes but also the whole neighborhood. Therefore it is in the best interests of GSEs and private banks to let current tenets stay and to find new tenents to occupay homes that are forclosed.

Occupants will prevent the wholesale theft and destruction of the forclosed homes and save the banks millions in costs to repair, rebuild and replace stolen items from forclosed homes.

2008 Dec 15 11:31 PM

[Thomas Smic...:]

There is nothing worse than an absentee Landlord. For tenants, or for the property.

This is going to be a fiasco.

2008 Dec 16 09:54 AM

[epam50:]

How about identifying your authors, so we readers can identify their biases and rants in the future. To do other wise is somewhat cowardly........

2008 Dec 16 11:42 AM

[jhaus:]

Problem:
Fannie the Landlord

Solution:
www.nnnrent.com/2008/1.../

2008 Dec 16 09:09 PM