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Homeowners- Are You Worried about Foreclosure? New Deed for Lease Program Available

Fannie Mae is implementing the new Deed for Lease Program under which qualifying homeowners facing foreclosure will be able to stay in their homes by signing a lease connection with the voluntary transfer of the property deed back to the lender. This program does not include a repurchase option.

“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for a loan modification” states Jay Ryan, Vice President of Fannie Mae. “This new program helps to eliminate some of the uncertainty of foreclosure, keeping families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities because of prices dropping further from abandoned houses available. It hopefully will soften the social and financial impact on homeowners loosing their homes.

The new program is designed for borrowers who don’t qualify for or have not been able to obtain other loan work-out solutions, such as a loan modification. Under Deed for Lease, borrowers transfer their property back to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a current market rate.

To participate in this program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Tenants of borrowers may also be eligible for leases under the program. Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income.

Leases under the new program may be up to 12 months, with the possibility of renewing the term on a month to month extension after that time period. A Deed for Lease property that is subsequently sold includes an assignment of the lease to the buyer.

We will see prices bottom sooner under this type of program as properties (which are currently being withheld) are sooner placed on the market. However, the process will still lenghten the recovery of the real estate industry from its deep-rooted recession. The reason: after the one-year lease period is up, properties will be dumped onto the market at a time when the market would be otherwise be going into a recovery or a sales volume upswing.

content courtesy of Paul Gonzales and First Tuesday editor Giang Hoang Burdette

For more information contact: Pam and Joanna. We are here to help and we answer our phones!

Pam Parton  760-580-1615                Joanna  760-580-1630