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.
