Keeping tenants makes sense

Keeping tenants makes sense

Scripps Howard News Service: One of the crueler side effects of the housing slump was that renters, even if they had kept faithfully current on their rent, were evicted if their landlord went into foreclosure.

Fannie Mae, prodded by a Connecticut advocacy group, has announced that on Jan. 9, when its holiday moratorium on evictions expires, that tenants paid up on their rent may stay in their homes even after foreclosure.

This makes so much sense that it’s puzzling why it wasn’t done much earlier. It’s less disruptive of the tenants’ lives. It saves money, about $2,500 an eviction. It prevents vandalism, maintains the property and helps stabilize a community. And the income stream might also serve as an inducement for someone to buy the property.

The Washington Post says about 4,000 renters live in properties foreclosed on by Fannie Mae, a number that could increase substantially because the mortgage delinquency rate is still rising.

The other huge government-backed mortgage guarantor, Freddie Mac, should follow its sister agency’s lead. The advocacy group New Haven Legal Assistance says it hopes Fannie Mae’s policy on renters will serve as a model for private lenders and state legislatures.

Many mortgages were packaged in bulk and sold as securities. A spokesman for Deutsche Bank said that property “is held in trust by us but it is effectively owned by the hundreds and thousands of people that own a tiny sliver of mortgages in any one pool.”

It seems that the financial geniuses who dreamed up these instruments could surely find a way to unravel them so that lenders, property owners and tenants are protected.