Fannie Mae Rental Program to Help People Facing Foreclosure

[Nov 6, 2009.]

 

Fannie Mae says that some homeowners facing foreclosure can continue to live in their homes under its Deed for Lease program. The plan is targeted at homeowners who don't qualify for modifications of mortgage loans. Here's what you need to know about the program.

From Homeowner to Renter

Fannie Mae's program allows people to stay in their homes as renters for up to a year. After that they may be able to work out month-to-month extensions. A homeowner with a mortgage guaranteed by Fannie Mae can participate in the program by signing a lease and voluntarily transferring the property deed back to the mortgage lender through a deed in lieu of foreclosure. The house is then leased back to the homeowner at the current market rate.

The homeowner must live in the home as his primary residence. Also, any other liens on the property must be released. The prospective renter must show proof that the market rental rate is no more than 31% of his gross income.

Helping Families and Communities

The program is viewed as a positive step by many because even though some people are struggling to make mortgage loan payments, they can afford a lower rent payment. "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," Jay Ryan, Vice President of Fannie Mae, said in a statement.

The program also can keep a lot of houses off the market during a time when demand for homes isn't strong. If Fannie Mae took the homes through foreclosure and forced the homeowners to move, many of these properties would sit abandoned. Empty homes often fall into disrepair or attract vandals.

Do You Qualify?

Eligibility for the program depends on several factors, including:

—Whether or not the home has been kept in good condition

—Whether the number of occupants is appropriate for the size of the home

—The people who sign the lease must agree to a credit review

—Anyone over 18 who lives in the home must have a background check

—Renters insurance may be required if there are pets

—There are no signs of illegal activity at the property

Not All Mortgage Loans Qualify

Talk with your mortgage lender to find out if you qualify for the Deed for Lease program. Some people who won't qualify for the program include people with the following types of mortgage loans: Home Equity Conversion Mortgage (HECM), USDA Rural, FHA, VA, and second liens.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.