WASHINGTON – 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.
Fannie Mae, which announced similar plans earlier 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 mounting mortgage losses put them in distress that was a prelude to the broader financial crisis that hit Wall Street last year. Fannie and Freddie combined own or guarantee about half of 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 the end of February.
However, Freddie Mac hasn't explained how tenants will be notified of the policy and hasn't committed firmly enough to halting evictions, said Amy Marx, a staff attorney 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.