John put this find on the sidebar, but it was too wierd to not upgrade it to a post.
In a world where concerns about moral hazard have gone the way of the Dodo bird, Freddie Mac has brought unconcern to new heights. [Or would that be lows?]
How’s this for unbelievable? So you didn’t make the payments on your property and are now in foreclosure. They not only will allow you to live in it should you choose, you can rent it out to someone else if you don’t!
WASHINGTON (AP) — Mortgage finance company Freddie Mac said it will allow some borrowers to rent out their homes after losing them to foreclosure.
The goal of the new policy, announced Friday, is to prevent properties from becoming vacant so they won’t fall into disrepair.
Freddie Mac also said it will allow renters to remain in their homes even if their landlord enters foreclosure. The McLean, Va.-based company currently 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 David Moffett.
Sibling company Fannie Mae announced similar plans for about 4,000 renters earlier this month.
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.
I don’t know about anyone else, but I don’t think I’d care to have a landlord that was just foreclosed on. If they couldn’t make their mortgage payment, how likely are they to have the funds to fix the water heater if it goes out? That is unless of course they just chose to walk away. If that’s the case, why should they be allowed the use of the property at all?
I’m not sure what they are smoking/drinking/thinking at Fannie and Freddie’s loss mitigation meetings, but they should cancel them until the participants can show up sober!
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Maybe its the new ponzi scheme to kickstart housing?
1) Buy a home you can’t afford
2) Foreclose on it
3) Rent it out
4) Use the rent money as stated income to buy second home
5) Foreclose on that home
6) Rent it out
You’ve now got two rental incomes coming in, with no mortgage payment! It’s a win-win(tm)! And if we all do it, we could all be in foreclosure, renting from each other, in no time!
i actually wouldn’t have much of a problem with this IF they put measures in place that would dictate the rent check go straight to fannie/freddie (not the “homeowner” if you can even call him that?). but that would make way too much sense.
AZSaluki-
Why doesn’t F&F hire property managers and rent it out themselves? Having a team of “property managers” that are in financial trouble doesn’t make much sense to me.
Huh?
I read that differently. They will rent out to both current renters AND former property owners (rather than eviction).
This way, F&F get to get some income while they try to sell the place. (or at least while it sits in the pipeline waiting for it to go on the market which can take months and months, if not a year) Everyone is just swamped with foreclosures, so much they cannot even get them listed.
I’d just prefer a nice little RTC to sieze properties, evict tenants and sell the properties as fast as possible. It’ll crash the market price, but it’ll set a floor and clear the market much faster to allow it to be on a firmer footing.
Think about this… the reason that houses aren’t selling the current market is because there’s no urgency to buy. (I’ve been sitting on the sidelines for nearly 5 years, another 1 or 2 isn’t going to kill me). This is the psychology of deflation; waiting to buy reduces the price I pay. The velocity of money slows down considerably when people know they’ll get a better deal by waiting.
Once you liquidate the houses, people start fearing they will miss the “best deals” and will jump in when it becomes economical.
Either way, I don’t care. Most of SoCal is still substantially overvalued (in most cases, houses on the market are overpriced by 40, 50, or even 80%.) Nothing has changed except for transaction volumes. They have dropped off a cliff, and the constant drip, drip, drip of releasing foreclosures only cements in my mind that I’ll have 2 or 3 years of a “bottom” to pick out the best house at the best price. Unless prices fall hard and fast, there’s no reason to buy (here at least). In those areas that have massive oversupply? Prices could fall there for a long, long, long time and the equilibrium is a long way off.
Just my opinion, from one of the original “bubble sitters”
Chuck Ponzi
Upon re-reading this, I’m getting a different take. They are saying former owners may stay in the house and rent from Freddie. They are saying renters may continue to rent, post-foreclosure (I presume from the new owner Freddie). It doesn’t really say that a renter is going to be able to rent from a former owner. Either way, it is going to open the door for more fraud and abuse.
What the F????
It is so screwed up that the government is trying anything (as insane as that is). Back in 2005 and 2006 the powers at be were laughing at everybody as prices artificially skyrocketed. They are not laughing now are they?