Fannie Mae Launches "Deed for Lease" Program for Homeowners who do not qualify for loan modifications

 The following is general legal information only and is not legal advice, or to be construed as legal advice.  For specific questions please contact a real estate or foreclosure defense Attorney.  Steve Vondran, Esq. practices law in the areas of Real Estate, Bankruptcy, and Foreclosure Defense.  He assists homeowners in California and Arizona where he is licensed to practice law.  He also holds a real estate broker's license in both states.  He can be emailed at Steve@VondranLaw.com or called at (877) 276-5084.

Here is a basic outline of the Fannie Mae DEED FOR LEASE program.  As you may know, Fannie Mae is a government sponsored entity (partially privately owned corporation) that buys loans from so-called "lenders" and Fannie Mae then securitizes these loans, and the loans are often serviced by a loan servicer on their behalf as "investor" of the loan. 

Fannie Mae has launched a new Deed for Lease Program designed to (1) Minimize displacement of families being foreclosed upon, and (2) Prevent neighborhood blight caused by vacant foreclosed homes. 

Some initial research indicates as few as 1,200 homeowners may have been assisted by this program, while Fannie Mae has (during the same general period) foreclosed on roughly 57,000 homes.  This means, don't count on the program working, but it is worth investigating.  Fannie Mae showcases some of its foreclosed properties on www.HomePath.com

GENERAL GUIDELINES FOR FANNIE MAE DEED FOR LEASE RENT-BACK PROGRAM:

•(1)    The loan must be owned by Fannie Mae (use their website here to see if your Loan is owned by Fannie):  http://loanlookup.fanniemae.com/loanlookup/

•(2)    Contact your loan servicer and see if you are eligible for the program and eligible to execute a "deed-in-lieu" of foreclosure (this means you sign over the deed to the loan holder in lieu of being foreclosed on).  The owner of the loan, through the loan servicer, must agree to accept the deed-in-lieu of foreclosure.   This is a requirement of the program.  In some cases, you may only qualify for Deed in Lieu if you only have a first mortgage.  In other instances, you may qualify if the second mortgagee releases your lien.

•(3)    The property must be primary residence / owner occupied (landlord-owner may qualify if tenant uses property as primary residence).

•(4)     Borrower must be able to pay market rent for the lease (which is a one year lease and option to extend by term or month-to -month).  A property management company will determine market rate.

•(5)    Rent payment cannot exceed 31% of Gross Monthly Income (yes, you will be required to submit financials).

•(6)    Borrower cannot have had more than 12 late payment s on loan and cannot be in Bankruptcy.

•(7)    FHA and VA loans do NOT qualify.

•(8)    Borrower must have made at least three payments on loan.

•(9)    House remains for sale and any new owner of the home would take "subject to" the lease.

Note: Freddie Mac has a similar program, although it only applies following foreclosure of the property (no deed-in-lieu) and leases are typically month to month rather than a yearly lease.

Note2: From what I am told, the deed-in-lieu of foreclosure will have a less impact on your credit, although your credit will still be damaged. 

Note3: Also, you need to check with your tax attorney, accountant, or CPA to see if there are any tax implications to signing over the deed-in-lieu.  We are not financial advisers.

More information about the Fannie Mae Deed for Lease Program can be found here: http://www.fanniemae.com/newsreleases/2009/4844.jhtml?p=Media&s=News+Releases