Deed For Lease Program Allows Some To Avoid Foreclosure
November 21st, 2009 categories: Seller Resource
There is a new way for troubled homeowners to avoid foreclosure. Fannie Mae has implemented a new deed for lease program, which allows borrowers who do not qualify for loan modifications an option to stay in their home.
Foreclosures are a growing problem, both here in Sonoma County, and also nationally. So what options are there for troubled homeowners? Borrowers have always had the option of short sales to avoid foreclosures. With the new making homes affordable plan, there are also have loan modifications (for those that qualify) as an option to help people stay in their homes and avoid foreclosure. Now, there is a new option, the deed for lease program.
So what is the deed for lease program, and how does it help people stay in their homes? The deed for lease program allows eligible homeowners to transfer the deed of their property back to the lender and they can then sign a lease to remain in the home. Borrowers must live in the home as their primary residence, and must also be released from any subordinate loans before this program will be approved for a homeowner.
The deed for lease program is very similar to a deed in lieu of foreclosure situation, however, the homeowner gets to stay in their home, as a renter, after the deed is transferred.
The deed for lease program helps those who are in trouble financially to have a place to live and avoid moving costs. The program also helps to minimize the number of foreclosures that would be abandoned due to neglect and disrepair. Homes that are neglected, and lose value due to disrepair, not only lower their own value, they also decrease the value of homes in the surrounding areas. In effect, the new deed for lease program allows lenders to help maintain the property values of home to be leased, as well as the value of surrounding homes as well. The deed for lease program will help to maintain the value of neighborhoods and communities, and will mitigate them turning into areas with high vacancy rates, which often times lead to higher crime rates.
I do want to be clear that the deed for lease program is not part of the loan modification program the U.S. government recently unveiled. The deed for lease program is an effort by Fannie Mae to assist is stemming the foreclosure crisis.
To qualify, one of the big hurdles is for the homeowners to prove they can afford market rent. Affordability, in this case, is defined as the potential rental payment can be no more than 31% of the homeowners (would be renter) pre tax income. The leases will be for 12 month terms with possible month to month extensions. If the home is sold, the new buyer must honor the lease that is in place.
It is also fair to note, that the tenants of homeowners who are have financial difficulty may also qualify as potential renters.
Some critics of this program have said that this only delays the inevitable; however we think it is a good thing. No data has been shown on either side of this debate, however, it just feels and sounds like it will help.
If you have any questions regarding how to avoid foreclosures, or Sonoma County, please feel free to contact us.
