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Freddie Mac to keep borrowers in foreclosed homes

Mortgage holders will be allowed to stay on as renters.

January 31, 2009|Peter Y. Hong

Freddie Mac, the government-sponsored mortgage finance institution, said Friday that it would allow some borrowers whose houses are in foreclosure to remain in their homes as renters.

The new policy's direct effect will be modest. Freddie Mac has only about 8,500 properties in foreclosure, and many are vacant. Nationwide, various estimates place the number of homes in foreclosure at more than 2 million.

But economists and fair-housing advocates say the policy could be a model for a broader program to enable turned-out borrowers to rent their homes.

Homes abandoned after foreclosure often become eyesores as lawns die, repairs are not performed and, in some cases, vandalism occurs. Local officials say such properties can hurt overall property values in their neighborhoods.

"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 M. Moffett.

The Freddie Mac program would charge market-rate rents. And, with rents falling in many cities, the homeowners turned tenants would generally pay far less per month than their old mortgage payments.

Freddie Mac will also allow tenants living in rental property that has been foreclosed upon to stay put with month-to-month leases.


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