Fannie As A Landlord-A Singularly Bad Idea

Making the rounds tonight is a proposal that the GSE’s will not evict renters from properties on which they foreclose. How do they intend to manage this process? This has disaster written all over it. Herewith a few observations:

  • The rental contract exists between the owner of the property and the tenant. If one of the GSE’s forecloses, that contract is null and void. How do they intend to execute a new contract? Execute a new lease or simply assume the existing lease is in full force and effect? If it is the latter, I suggest the courts will have a field day.
  • Who is going to collect tens of thousands or rental payments from all of these tenants?
  • How do the GSE’s plan on collecting past due rents?
  • Who will handle the eviction process when tenants fail to pay?
  • How do they plan to handle the maintenance issues?
  • In the event a tenant moves will they release the property?
  • Have they considered the difficulties of selling a property occupied by a renter?
  • In the event of a sale, who will be responsible for evicting the existing tenant?
  • How will a mortgage underwriter evaluate a property being purchased by a prospective owner-occupant that is occupied by a renter?
  • Who is responsible for malicious damage when a Fannie house is sold and the renter takes their frustration out on the property?. Who would want to take that risk?
  • Has anyone thought about how the professional renters are going to game this system?

I know this a feel good proposal and I also recognize that there are a lot of people suffering hardships as a result of the mortgage and housing crises. At the same time, you can’t cure every problemĀ  The proposed solution to this particular issue needs some thought. We really do have to quit bouncing off walls and consider the consequences of our actions.

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