US Regulators Mandate New Tenant Protections for Federally Backed Mortgages

In a significant move to enhance tenant rights, US regulators will require landlords with federally backed mortgages to provide tenants with a 30-day notice before increasing rents or terminating a lease. This policy, set to take effect in February 2025, is designed to impact millions of renters across the nation. Apartment owners who receive financing backed by Fannie Mae or Freddie Mac must implement several tenant protections. These include a mandatory five-day grace period for late rents. The directive from the Federal Housing Finance Agency (FHFA) will apply exclusively to newly originated or refinanced mortgages.

A Step Toward Federal Tenant Protections

“This is the first step toward conditioning federal financing on tenant protections,” said Tara Raghuveer, director of the nonprofit National Tenant Union Federation. Tenant advocates have long pursued protections linked directly to federal financing. This is because Fannie Mae and Freddie Mac dominate the rental housing mortgage market. In 2023, these enterprises accounted for 58% of newly originated apartment loans, according to a Morgan Stanley report. More than 16 million renters, representing about one in four rental households, reside in federally financed properties.

Advocacy Groups Push for Stronger Measures

Despite the new policy, tenant advocates argue it falls short of their goal for more robust measures, such as rent control for properties with federal financing. Diane Yentel, president and CEO of the National Low Income Housing Coalition, described the protections as weak. She characterized them as meeting only a “bare minimum level of tenant notification.” These concerns highlight ongoing challenges in housing policy oversight by US regulators.

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Aligning with Presidential Initiatives

The FHFA’s announcement came shortly after President Joe Biden mentioned capping rents and housing costs during a press conference. He also highlighted this issue in the June presidential debate with former President Donald Trump. The directive is part of broader White House efforts to establish a renters’ bill of rights. In November, the US Department of Housing and Urban Development introduced a rule requiring landlords of federally subsidized rental housing to provide 30 days’ notice before filing an eviction. This rule affects nearly 4 million tenants. Additionally, in March, the Biden administration announced a 10% cap on rent increases for properties receiving funding through the Low Income Housing Tax Credit. This policy covers over 1 million homes.

Industry Concerns and Criticisms

Last year, the FHFA solicited input on tenant protections from various stakeholders, including tenants, landlords, and lenders. Proposed changes included notices for termination or rent increases, rent control, just-cause eviction standards, and a federal Office of Tenant Protections. However, industry leaders have expressed criticism. The Mortgage Bankers Association, in a July letter, argued that lenders cannot monitor landlord–tenant relationships. They also stated that rent control would discourage borrowers from seeking federally backed financing.

Moving Forward

As the February 2025 implementation date approaches, both tenant advocates and industry stakeholders will closely monitor the rollout of these new protections. While the policy represents progress for tenant rights, the debate over the adequacy and enforcement of such measures by US regulators is likely to continue.

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