Fannie Mae, the troubled mortgage company, is getting into the rental business in order to help some debt burdened consumers. Fannie Mae is a government controlled mortgage company and many feel it has an obligation to help consumers faced with losing their homes during the economic downturn.
It seems the mortgage company is going to try a new approach as foreclosures rise. The company is going to let soon-to-be-foreclosed consumers rent their homes for a year so they have more time to find new places to live and to adjust to their changed financial conditions. But there is possibly another reason the mortgage company is trying to be so helpful. It might be Fannie Mae does not want to deal with thousands of empty homes.
Anyone who has witnessed the rapid decay of an empty house can understand why the proposed rental arrangement benefits both Fannie Mae and foreclosed homeowners. The new program is called “Deed for Lease”. The homeowner must sign over title of the property, and once the year is up, he or she can then rent the house on a month to month basis.
This process will save Fannie Mae money because there will be no need for a foreclosure process to occur. The homeowner willingly signs the deed over to Fannie Mae.
The consumer can benefit from this arrangement in a couple of major ways. The homeowner is able to remain in the house. In addition, the consumer’s credit is not damaged as much as it would be if there was a foreclosure recorded. The President of Fannie Mae is Jay Ryan. He said the rental program will “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.”
Not everyone believes this is the right approach. Some think Fannie Mae should be working with homeowners to restructure loans and lower payments rather than taking ownership of the houses. Some people have paid for many years on their homes and it could be a bit galling to become a renter of the same house knowing ownership has been lost.
Fannie Mae claims this rental program is for people who cannot qualify for a loan modification but can afford the rent. The process whereby a consumer signs over a deed is called a deed-in-lieu of foreclosure. Some believe Fannie Mae is proposing this program to benefit itself more than homeowners. The gamble is that the homes will one day be worth more and able to sell for a higher price.
There is another perspective of this proposal. Since Fannie Mae is government owned it means taxpayers are taking possession of yet more overvalued properties. This program could simply add to Fannie Mae’s financial problems even as it asks for another $15 billion in government aid.
There is a feeling there may not be a lot of takers of this program based on prior history. Through October 2009, Fannie Mae has only taken ownership of 2,000 homes through the deed-in-lieu process. It has foreclosed on 90,000 properties.
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