Give up home, Fannie will lease it back

‘Deed for Lease’ program avoids foreclosure

By Inman News, Friday, November 6, 2009.

Inman News

Fannie Mae is offering to let troubled borrowers who don’t qualify for a loan modification stay in their homes as renters if they volunteer to relinquish ownership through a deed in lieu of foreclosure.

Fannie Mae’s Deed for Lease program is also available to qualified borrowers who had previously been granted a loan modification but were unable to keep up their payments.

The homes will be leased at market rates, and borrowers or tenants will qualify to stay only if they can document that rent does not exceed 31 percent of their gross income.

“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,” said Fannie Mae Vice President Jay Ryan in a press release.

Like short sales, deeds in lieu of foreclosure allow troubled borrowers to avoid the foreclosure process, which can be expensive for lenders and damage homeowners’ credit ratings for years.

Critics say that when home prices in some markets began falling and the financial crisis took hold, many loan servicers were too slow to embrace short sales.

Instead of allowing some homes headed to foreclosure to be sold for less than what the borrower owes and forgiving the difference, lenders have often preferred to repossess them.

In the process, they have built up large inventories of “real estate owned” (REO) properties — many worth less than what prospective buyers were willing to pay in a short sale.

In its most recent quarterly report to investors, Fannie Mae said its loan servicers completed 13,086 short sales during the first six months of the year — a 26 percent increase from… (continue reading)