Fannie Mae announced Thursday that it is implementing a program under which qualifying homeowners facing foreclosure will be able to remain in their homes as renters if they voluntary transfer the property deed back to the lender.
The GSE’s new Deed for Lease Program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under the program, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at market rate.
“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications,” said Jay Ryan, Fannie Mae’s VP. “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.”
To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Investor properties with tenants are also eligible for the program.
Prospective renters must show that they can afford to pay the new market rental rate and must be able to document that the rental payment is no more than 31 percent of their gross income.
Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period.
A Deed for Lease property that is subsequently sold includes an assignment of the lease to the buyer.