Fannie Mae gets creative on foreclosures....

Fannie Mae has anounced a new program to lease or rentback properties they have foreclosed to the former owners. The "Deed for Lease" program will allow property owners who don't have the qualifications/eligibility for loan modifications or were unable to meet other work-out solutions to stay in their own homes.

Qualified Property Owners would be able to deed thier property back to the lienholder (Bank/Lender). The lienholder would then enter into a lease agreement with the Property Owner, now known as a Tenant. The agreement would be at a market rate for up to a year. After the lease term is up, renewal or possibly month-to-month tenancy may be available.

Jay Ryan, Vice-President of Fannie Mae, said in the release “The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications. This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.”

To qualify, the home must be the borrower’s primary residence, and he or she needs to be released from any subordinate liens on the property. The borrower also has to document that the new market rental rate doesn’t exceed 31% of his or her gross income.

In a separate statement, Dean Baker from the Center for Economic and Policy Research stated “This policy takes advantage of the fact that in many former bubble markets, ownership costs are likely to be far higher than the cost of renting an equivalent unit, if the homeowner purchased their home near the peak of the market. In many cases this gap can be dramatic. For example, the savings on a moderate-priced home purchased near the peak of the market in the Washington, D.C., area could be more than $1,300 a month. The gap between ownership costs and renting in the Los Angeles area could be almost $2,000 a month. Many homeowners who could not sustain mortgages based on the original purchase price, even with sharp reductions in interest rates, can afford the market rent.”

Baker labeled the Deed for Lease Program a “very big step” toward giving families facing foreclosure more housing security. “Families that like their home, their neighborhood, or the schools for their children will have the opportunity to stay in their house even after foreclosure. This is also good policy for neighborhoods that have been hard-hit by foreclosures. The Deed for Lease Program will keep the homes occupied rather than being an eyesore and a potential safety hazard.”

Some think this is a great step in solving the housing dilemma and still others see this a real win-win situation. The lienholders getting the property back is a given but making things easier on the foreclosed owner(s) and their families is fantastic; added to the back end is the lienholders holding the property and reaping a higher yield on sales at a later date might just help this sticky wicket so many lienholders are in.