Fannie Mae announced a plan on Thursday that will allow borrowers facing foreclosure to lease their homes. The program, called Deed for Lease or D4L for short, allows borrowers facing foreclosure to hand their deed to the lender in exchange for paying the market rate rent on the home for at least 12 months.
To qualify for the program, borrowers have to have mortgages insured by Fannie Mae, be unable to qualify for President Obama’s mortgage modification program, and be unsuccessful renegotiating with their lenders. While eligible borrowers would have to voluntarily give up the deeds to their homes, they would be able to stay for at least a year, providing that they paid the market rate rent. Rents would then be renewable on a month-to-month basis. Eligible borrowers must document that the new market rate rent is no greater than 31% of their gross income to qualify for Deed for Lease.
The Deed for Lease program is an extremely interesting and valuable way to keep delinquent borrowers in their homes, or merely to allow time for a transition. The program may be especially valuable for families with children, whom they do not want to remove from their schools in the middle of the year. It will help give families more time to come up with options. It will also help underwater homeowners– especially in areas that have seen property values drop significantly.
Furthermore, since tenants of qualifying borrowers are also eligible for the program, Deed for Lease will help tenants whose landlords face foreclosure. As a result, it appears that, though Fannie Mae provided no estimates for how many borrowers will be eligible for the program, Deed Lease looks to be a promising alternative to severely delinquent borrowers with Fannie Mae loans facing foreclosure–and for their tenants.
More information about the program can be found at www.efanniemae.com.