Fannie Mae Offers Foreclosure, Lease-Back Option
HOME LOANS, INDUSTRY NEWS, TIPS FOR SELLERS
November 17th, 2009
Last week, Fannie Mae announced a new program targeting borrowers that can no longer afford their home. In exchange for expediting the foreclosure process the borrower is offered the right to lease back the home for up to a year. This allows the lender to avoid the more costly and time consuming traditional foreclosure process while the borrower gets to stay put and pay fair market rent while creating opportunity for the borrower to regroup financially.
Dubbed the “Deed for Lease” program, after going through a qualifying process and being approved, the borrower would transfer title to Fannie Mae using a deed-in-lieu of foreclosure. The advantage to the borrower is this process results in a smaller credit ding than a straight foreclosure, which can damage credit so severely securing a rental is difficult. This option could also be helpful if the borrower works at a job nearby or has children attending area schools.
Some particulars include:
- Must be at least one payment (but not more than 12) behind
- Must have applied for and been denied a loan modification
- Must prove your ability to pay fair market rent (rent can’t exceed 31% of monthly gross income)
Don’t bother applying if you can afford your current mortgage payment but would rather walk away because your property is upside down. Don’t do this because you want to buy the house back when Fannie Mae offers it for sale- your credit is unlikely to be strong enough a year after the deed-in-lieu.
If interested, click below for Fannie Mae’s loan look-up feature to see if your loan is held or insured by them. FHA, VA and other government backed loans are ineligible.
Click here to see if Fannie holds your loan:http://loanlookup.fanniemae.com/loanlookup/
The program will not work if:
- Fannie Mae is only a second lienholder
- Borrower can’t get a second loan released
- Borrower has filed for bankruptcy
- Borrower is involved with litigation concerning the property
- Zoning or Homeowner Association rules prohibit renting
Some would argue this program will only prolong the agony of finding the bottom of this current housing market meltdown. I doubt many qualify for this program so the impact, in my opinion, will be negligible. If lenders were to aggressively foreclose and dump distressed properties on the market simultaneously, it could lead to a death spiral of home value erosion creating wave after wave of foreclosures. This program, along with other efforts underway may eventually bring price stability to a battered, but vital, segment of our economy.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS REAL LIVING
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Generally I do not post on blogs, but I would like to say that this post really forced me to do so! really nice post,and very informative.