A new initiative by Fannie Mae might keep troubled borrowers in their homes as tenants instead of owners. The “Deed for Lease” program lets homeowners who cannot keep current on their mortgage payment transfer their title to Fannie Mae and start paying rent at market rates, which most often are lower than mortgage payments.
As much as I love this for the borrowers who are struggling, this could be a disaster for the real estate market. What is going to keep someone paying their mortgage if they are “underwater” by $100,000 when they could stay in the same home AND pay less rent?
This is going to hurt the banks more than they will help them… once again, a “good” idea that is going to backfire.
That being said, if you are struggling to meet your mortgage obligations, call your lender. Most likely, you will need to be late on your payments for you to qualify (like the loan modification programs).
To qualify for the “Deed for Lease” program, borrowers must show that:
- They did not qualify for a loan modification.
- They cannot afford their current mortgage.
- They can afford rent.
Be sure to ask when the lender will put the home on the market so you can plan accordingly.
After never missing a payment in 18 months and always paying more each time, never late, no overdrafts, or over
the limit, I could not get into there web site to make the
payment on time, I was ONE DAY LATE and they raise my interest 10 %. I told them what the proplem was and I asked them why they had to raise my rate. They told me I was a day late and would not reverse their decession. I put the card away and will not use it any more.
We are underwater on our mortgage by over $100K, but here in the Silicon Valley the rent may still be very high. For twenty plus years the payments were only $250/mo.
After the IRS wanted $40K our balance went from $7,500 to pay off the old house, now it is $528K, and payments balooned to $3.7K! They were modified last year when we ran out of savings, down to merely $2750/mo, and we are now months behind! We applied for the HAM program…