Fannie Mae to allow troubled homeowners to rent back homes

Mortgage titan Fannie Mae said it will begin allowing homeowners facing foreclosure to rent back their homes for up to one year in a move aimed at keeping a stack of foreclosures on its books from hitting the market, which is just beginning to show signs of recovery.

The new program is meant for troubled borrowers who don't qualify for or haven't been able to get a loan work-out, such as a modification, according to Fannie's news release.

Under the Deed for Lease program, the borrower would transfer title to the property to the lender by completing a deed in lieu of foreclosure and then rent back the house at market rates -- which in many markets have fallen over the last year and probably would be cheaper than a mortgage payment on a loan made during the boom years.

-- Alejandro Lazo

Photo: Rows of homes in Las Vegas. Credit: Bloomberg

Comments

[Eric Torres]

While this is much needed and a step in the right direction unless other non-Fannie Mae note holders follow suit and provide a similar Deed for Lease program this will not stem the forclosure glut that is continuing to build. However,in the case of Deed for Lease since the banks will be provided an income stream to offset the incurred losses and costs associated with forclosing on a property perhaps they will be more inclined to play ball.

[Glenn Hayes]

This makes a lot of sense and will help keep some homes occupied that might otherwise set vacant for months.

[Laker]

Fannie mae is not a bank...and even if they were a bank, banks are in business to lend money and make money on investments they are not in the business as landlords....
That is why they hired that management company. That management company will be in charge of collecting rent, fixing the leaking faucets, opening the backed up toilets, fixing leaking roofs...
One thing i know is that these management companies will make a killing, while the tax payers will get the ringer.
At the end, the renters will leave the places trashed to seek better housing...
kicking the can down the road.....

[Joey Jams]

How about this idea?

Some Homeowners have another option.

1. House is inspected to assess current condition.
pictures are taken. visual inspection of interior and exterior for intentional damage other than normal "wear & tear"
2. Re inspection every 3 months (not a professional appraisal but a 15 to 30 minute walk through.
3. Rents at market rates (adjustable annually)
4. Home owner meets condition for Deed for Lease but former home owner retains an option to repurchase house.
5. Renter preforms some normal maintenance with prior approval if capable or has volunteer friends help . Lender pays for materials and inspects work after completion. 80% of the labor cost (using current local wage (not prevailing rate but average of local home improvement contractors) hourly rate & time average) Will be placed in a special account. lender provides insurance. Special government exemptions for ALL taxes for earned income for labor cost.
6. Automatic renewal of lease every year up to 5 years providing all conditions are met
7. Renter may exercise the option to repurchase home at any time (at current market value average) if their income has changed enough to meet current mortgage qualifications. the 80% labor cost for normal maintenance will apply towards the down-payment.
8. If the current value of the the home exceeds the total of all of the following
a the total of market value when the deed was transfered to the lender
b. the amount of the loss incurred by the lender at that time.
c. the average adjustable mortgage rate that would have applied to the total of a & b during the time between the Deed for Lease & the current repurchase.
Then any amount over that would be shared equally by the lender and the re buyer. That amount would be applied to the down-payment and be subject to any capital gains taxes that would normally be required when the re buyer sold the home.

Something along these lines may encourage the renters to treat their rental home like their home and benefit everyone

Also something similar at least when the home is sold (refinanced) for homeowners who maybe be getting too much help with refinancing (forgiveness).
If the home is sold within 10 years and the selling price is 10% more than the loan amount at the time of refinancing including any forgiveness amount plus all interest that would have paid if not refinanced less any capital improvement money spent the lender would be reimbursed for that amount forgiven and or the difference in interest rates.

This would not preclude any lawful remedies that may be available to homeowner to receive monetary compensation for any violations of the law by the seller, real estate agent, appraiser and or lender

If any of the additional money that is received by the lender was previously given or credited by the US government to the lender would be returned to the US Treasury.

These ideas are for fairness for the taxpayer and those homeowners that are making their payments and not getting any assistance

[Ace]

Just another pretend plan to make it seem like the government is doing something. This will be all over the news as if they are saving the country... but you and I will never meet anyone who actually does the deed for lease... just like the loan modifications.

Good PR... wont help anyone.

[Loan modification Consultant]

It is a great initiative by Fannie Mae. It looks like that in one year the economy will start growing again so that home owners will be better off managing mortgage payments.

[Loan Modification Advice]

The recovery of the economy is still a long way ahead. I think it is a great initiative by Fannie to help the real estate market avoid hitting rock bottom again.

[Mortgage loan Consultation]

It is a great way to help home owners. I am glad it has already started. Hopefully, it will go on with other institutions.