Fannie Mae Launches Lease Program for Borrowers
Homeowners who are facing foreclosure may soon be able tornremain in their homes for up to a year under a 'Deed for Lease' programrnannounced Thursday by Fannie Mae.
Under the terms of the program qualifying homeowners who arernnot eligible for modifications to their mortgage may be able to sign a leasernwith the government sponsored enterprise and stay in their homes during arntransitional period.
Jay Ryan, vice president of Fannie Mae said that the programrnwill help eliminate some of the uncertainty of foreclosure, keep families andrntenants in their homes, and help to stabilize neighborhoods and communities.
Borrowers who qualify for the program but are not eligible forrnother foreclosure avoidance programs can transfer their property to the lenderrnthrough a deed in lieu of foreclosure and then sign a lease at marketrnrate.
Borrowers must live in the home as their primary residencernand must either have no subordinate liens on the property or arrange for theirrnrelease. The program may also be availablernfor tenants where the landlord is facing foreclosure. Both borrowers and tenants must be able torndocument that the new rental amount will not exceed 31 percent of their grossrnincome.
Participating borrowers or tenants can sign a lease for uprnto 12 months and may be able to remain in the home on a month-to-month bases afterrnthe initial lease expires. Should thernhome sell to a third party during the lease period, the lease will be assignedrnto the buyer.
During the first half of 2009, Fannie Mae took possession of 1,200rnproperties through a deed in lieu compared to 57,000 that were foreclosed. The rent-back provision, however, may givernborrowers a needed incentive to work with Fannie. Aside from a little less serious hit to theirrncredit, there has been little upside for a borrower in default to cooperaternwith their lender, especially if they were not likely to be subject to arndeficiency judgment.
A lease-back program launched this spring by Freddie Macrnrequires that borrowers first go through a full foreclosure before beingrneligible to rent the property.
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