Fannie Mae renting out foreclosed homes.

I’m happy to see the news that Fannie Mae will be allowing renters to continue to rent homes that have been foreclosed on. But I think it’ll be better if this is expanded to include renting back owner-occupied homes, too. It seems to me that this is just smart business—I imagine most lenders would be smart to establish this. They foreclose on a $300k house because the owner can only swing $1,500 of the $1,800 monthly mortgage, so the bank goes from making $1,500 to $0, plus they’ve got themselves a vacant dwelling, which is trouble. Better to convert the house into a rental, so that its occupants can continue to live there. This would be a boon for existing property management firms, or an opportunity for lenders to buy or establish property management groups of their own. With the caveat that I don’t know anything about potential tax benefits of a lender taking ownership of distressed property and then idling it, this approach seems like a win/win.

One thought on “Fannie Mae renting out foreclosed homes.”

  1. The fly in the ointment is that in a lot of the foreclosure-heavy areas, that $1500-$1800 spread is actually $1500-$4200, after the two year teaser rate mortgage has reset and the rate jumps. A short sale would be a good solution, but in a lot of these two year teaser rate deals, there’s an 80/20 or 90/10 mortgage split between first and second notes, and trying to get a short sale signoff from a second mortgage lender is next to impossible.

    My biggest head-scratcher in my foreclosure-ravaged town of Manassas is that the mortgage company owners are typically doing absolutely nothing to sell the properties – no marketing, no renovations, not even a coat of paint or a sign in the window. It’s like they expect them to magically sell themselves.

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