Fannie Mae as Landlord?
Fannie Mae will allow homeowners facing foreclosure to stay in their homes and rent them for as long as a year, as part of the government’s latest effort to help troubled borrowers, while keeping more foreclosed properties from hitting the housing market.
The “Deed for Lease” Program lets borrowers who don’t qualify for loan modifications transfer their property to Fannie Mae in exchange for a lease. Borrowers-turned-tenants will pay market rents, which in most cases are lower than the cost of mortgage payments, and might be offered extensions when their leases expire.
Fannie Mae wouldn’t say in its Thursday announcement how many homeowners it expects would take advantage of the program. The company acquired 57,000 properties through foreclosure during the first half of the year.
Borrowers have to demonstrate they can’t afford their current mortgage, but can pay the rent. The borrower’s mortgage servicer has to show the borrower didn’t qualify for a loan modification.
Fannie will use a professional management company to handle maintenance, and properties that are sold during the lease period will include an assignment of the lease to the new owner.
The move by Fannie follows a similar effort by Freddie Mac that began offering month-to-month leases to owner-occupants who had lost their homes to foreclosure. The Fannie Mae program differs in one important respect: Fannie’s foreclosed homes won’t be listed for sale.