Planning to buy a house in San Diego?
News for you is, Freddie Mac has an insane loss of $5.6 trillion due to high foreclosure rates and looking at 8,500 eviction notices. People may think that lenders are out to get them and their properties; and that lenders prefer foreclosing properties. Wrong. What would they do with the property? Yes, the obvious reason is to sell them. But with the sky high foreclosure rates, lending companies have no time to compensate foreclosure expenses with sales to recover their losses. Besides, they would rather get their money’s worth by receiving monthly payments than to be subjected to added work and expense.
So, the temporary solution? Rent out the place to ex-owners (delinquent borrowers). This way, they can still earn money while trying to sell the place – even if the profit is small, it is better than nothing. So in effect, because of the number of foreclosures happening simultaneously, Freddie Mac is “unofficially” a home rental business. This arrangement is unthinkable 10 years ago, but desperate times call for desperate measures.
Fannie Mae: To Allow Existing Tenants to Stay
Fannie Mae is looking at 20,000 foreclosed properties and 6,500 eviction notices. What would they do with the property? And the real casualties here are the tenants who have been religiously paying their monthly dues to their landlords only to be evicted because their landlord is a delinquent borrower. Not only are their lives disrupted by the need to find a new home and move to another community – communities are also affected by high foreclosure rates.
The solution? Fannie Mae will offer tenants a new lease at competitive market rates. This allows Fannie Mae to earn minimal income while the property is on the market for new buyers. To avoid complication if and when the sale goes through, the lease offered to the tenants will be on a month-to-month lease. So when it is time for the tenant to leave, the occupant cannot refuse or sue the lending company. Fannie Mae also offers financial assistance to tenants who wish to vacate the place.
Banks: Still Not Convince
Although giant lenders Freddie Mac & Fannie Mae are now offering foreclosed properties for rent, bank lenders are still hesitant about this idea. Though, they admitted in thinking about it and still weighing their options, banks are not into home rental business or in property management business. But we can never tell during these trying and unusual times. In fact, some banks are putting REO properties into the leasing market through their broker channel to maximize return-on-investment profit.
It seems that in these hard times, this is the only way that lending companies can recover at least some part of their losses. Though this is not the ideal scenario for them, they have to deal with this until they find a buyer willing to take the property out of their hands.
Tell Others What You're Reading!
Connect with me!
