Homeowners who are facing foreclosure may soon be able to
remain in their homes for up to a year under a 'Deed for Lease' program
announced Thursday by Fannie Mae.
Under the terms of the program qualifying homeowners who are
not eligible for modifications to their mortgage may be able to sign a lease
with the government sponsored enterprise and stay in their homes during a
transitional period.
Jay Ryan, vice president of Fannie Mae said that the program
will help eliminate some of the uncertainty of foreclosure, keep families and
tenants in their homes, and help to stabilize neighborhoods and communities.
Borrowers who qualify for the program but are not eligible for
other foreclosure avoidance programs can transfer their property to the lender
through a deed in lieu of foreclosure and then sign a lease at market
rate.
Borrowers must live in the home as their primary residence
and must either have no subordinate liens on the property or arrange for their
release. The program may also be available
for tenants where the landlord is facing foreclosure. Both borrowers and tenants must be able to
document that the new rental amount will not exceed 31 percent of their gross
income.
Participating borrowers or tenants can sign a lease for up
to 12 months and may be able to remain in the home on a month-to-month bases after
the initial lease expires. Should the
home sell to a third party during the lease period, the lease will be assigned
to the buyer.
During the first half of 2009, Fannie Mae took possession of 1,200
properties through a deed in lieu compared to 57,000 that were foreclosed. The rent-back provision, however, may give
borrowers a needed incentive to work with Fannie. Aside from a little less serious hit to their
credit, there has been little upside for a borrower in default to cooperate
with their lender, especially if they were not likely to be subject to a
deficiency judgment.
A lease-back program launched this spring by Freddie Mac
requires that borrowers first go through a full foreclosure before being
eligible to rent the property.
READ THE FANNIE MAE PRESS RELEASE