Homeowners in foreclosure may be able to take advantage of a special program Fannie Mae is initiating to help its customers to stay in their homes by renting. Known as the "Deed for Lease" program, homeowners who don't qualify for loan modifications are allowed to transfer their property to Fannie Mae in exchange for a lease.
How the Program Works
Homeowners who don't qualify for a loan modification can rent their home instead. Fannie Mae will allow homeowners to pay market rents, which for the most part are cheaper than mortgage monthly payments. In most cases, the lease will last for one year. If the lease expires, the lender may offer extensions.
Why They're Doing It
One reason Fannie Mae is taking on this strategy is to give homeowners time to come up a way to move. In addition, Fannie Mae says it is looking for ways to keep neighborhoods occupied rather than leaving homes empty, which can drive down home prices even further, partially because they're not well-maintained when empty.
If the home prices were to drop, Fannie Mae would have a more difficult time selling them at reasonable prices when the time comes. The lender is hoping that the overall housing market will be stronger a year away. Even more, the company would still be able to bring in some income until the house is sold.
Will It Really Help Homeowners?
There are a few benefits for homeowners who take advantage of the "Deed for Lease" program:
- Cheaper monthly payment: Since Fannie Mae will be using market rent rates, renters will likely be paying less than they did on their mortgage.
- Housing security for at least a year: Since homeowners will sign a lease that lasts at least a year, and Fannie Mae won't list houses for sale, they will be given the security of knowing they'll have stable housing for a while.
- Outside maintenance: Fannie Mae plans to hire a professional maintenance company to take care of the homes, something the homeowners previously had to do on their own.
Lender Freddie Mac offers a similar deal to its customers, two-thirds of which have already taken advantage of it. Fannie Mae anticipates similar success with its program.
Do you think an owner-to-tenant program like "Deed for Lease" is beneficial to homeowners facing foreclosure?
