Fannie Mae said it is finalizing a new policy to let tenants stay in homes it has foreclosed on if they can pay the rent.

The policy will take effect before a freeze on all foreclosures and evictions by Fannie servicers expires on Jan. 9, the government-sponsored enterprise said Monday.

Senate Banking Committee Chairman Chris Dodd, D-Conn., praised the move. "This decision will bring great relief to thousands of renters who were in the wrong place at the wrong time and were being forced from their homes as a result," he said.

This month the Federal Housing Finance Authority said that Freddie Mac's current policy is to evict tenants of one-unit properties it acquires through foreclosure. The GSE is drafting a policy that would let tenants remain in these properties under certain conditions, the regulator said. (Tenants of two- to four-family properties Freddie acquires through foreclosure can remain in the property provided one unit is available to show and the tenant-occupied units are inhabitable and up to code.)

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