The Agent Center Blog

Last week, Fannie Mae announced that it was implementing a new program called Deed for Lease. Designed to help qualifying homeowners facing foreclosure stay in their homes, the program gives them the option of signing a lease in connection with the completion of a deed in lieu of foreclosure, which returns the property deed back to the lender.

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. Tenants of qualified borrowers may also be eligible for leases under the program. In order to qualify, both borrowers and tenants must be able to document that the new market rental rate is no more than 31% of their gross monthly income.

Leases under the program may be up to 12 months, with the possibility of term renewal or month-to-month extensions when the initial term expires.

“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for [loan] modifications,” said Jay Ryan, Vice President of Fannie Mae. “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.”

While this may be true, the program has made me question its potential effects. I wonder what the overall result will be if the purging of REO’s slows down as a result of this program. If Fannie decides to hang onto properties and lease them for 12 months, won’t that prolong the housing decline? After all REO’s are always sold for far below top dollar, which gives first-time buyers and those in the financial position to buy a home the opportunity to do so, which has been helping the housing market rebound we’ve been experiencing over the last few months.

Also, going into the property management business is a rather dramatic departure for a government agency. Does this program reflect an overall change in philosophy, since up to this point they have not been in the business of owning and leasing homes? Is Fannie Mae now a competitor for other landlords and property managers?

Obviously these are questions that don’t have answers at this point, but I still think they need to be asked and the effects of this new program observed, as it could end up having a profound effect on both the housing market and the lending industry. 

by Brian Wilcher
Staff Writer, The Agent Center