As lenders scurry to fend off the continuing foreclosure crisis, Fannie Mae, one of the three government entities who purchases mortgages in the secondary market, announced a new approach last week. RENT YOUR HOME! Not to someone else, but to yourself.
The Deed for Lease program lets homeowners transfer the deed back to their lender and then sign a lease to remain in the home. The effort is aimed at borrowers with mortgages owned or guaranteed by Fannie Mae who do not qualify for or cannot sustain a loan modification. Borrowers must live in the home as their primary residence and must be released from any subordinate liens.
One question arises is how, if you have a second mortgage, you are going to be released from any subordinate liens, in other words, a 2nd or 3rd mortgage. I can see that perhaps so people can regroup within a year and get back on track, but given the sheer number of defaults, I am not sure this program is going to make much of a difference.
Homeowners must show they can afford market rent, but that payment cannot be more than 31% of the borrower's pre-tax income. Leases may be up to 12 months, with the possibility of renewal or month-to-month extensions. If the property is sold, the new owner picks up the lease. 31% is the government's number for maximum loan payment in a modification that is acceptable to the parties as well. So if my gross income is $4000, I cannot have a payment greater than $1240 dollars.
Certainly for many with adjustable mortgages, this formula will create a number that is seemingly more affordable. Time will tell.
Ron Margolis, RA, CDPE, ABR Hawaii Life Real Estate Services 808.346.7095 email: firstname.lastname@example.org