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Freddie Mac Announces New Foreclosure Policies

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By ALAN ZIBEL

The Associated Press

Published: January 31, 2009

WASHINGTON - Mortgage finance company Freddie Mac said it will allow some borrowers to rent their homes after losing them to foreclosure.

The goal of the new policy, announced Friday, is to prevent properties from being vacant and falling into disrepair.
Freddie Mac also said it will allow renters to remain in their homes even if the landlord enters foreclosure. The McLean, Va.-based company has about 8,500 properties in the foreclosure process, but many of those are vacant.

"Keeping foreclosed properties occupied and in better repair will support local property values and promote a faster recovery in the housing market," said Freddie Mac Chief Executive Officer David Moffett.

Fannie Mae, which announced similar plans this month, said it has stopped about 20,000 foreclosure sales and halted 6,300 evictions of owners or renters this winter.

Under Freddie Mac's new policy, tenants and former property owners need to demonstrate that they have enough income to pay the rental bill. Freddie Mac also said it would consider reinstating a mortgage for those borrowers who can qualify for a modified loan.

Washington-based Fannie Mae and Freddie Mac were taken over by the government in September after mortgage losses put them in distress that was a prelude to the broader financial crisis that hit Wall Street in 2008. Together, Fannie and Freddie own or guarantee about half the $10.6 trillion in outstanding U.S. home loan debt.

Both Fannie Mae and Freddie Mac also said Friday they would extend a previously announced suspension of evictions through February.

However, Freddie Mac has not explained how tenants will be notified of the policy and has not committed firmly enough to halting evictions, said Amy Marx, a staff lawyer at Connecticut-based New Haven Legal Assistance.

"The only thing that Freddie Mac has agreed to do is to not send the sheriff to forcibly remove tenants," Marx wrote in an e-mail.

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