Deed for Lease Program, a look at Uncle Sam’s Latest and Greatest
This morning I was reading through an article on Fannie Mae’s new “Rental Program” I had originally heard about this program several months ago when it first appeared on the radar as another attempt at creating a functional homeowner assistance program. Congress had approved this new program as part of the second round of stimulus geared at keeping families in their homes. As we all know, Loan Modifications have fallen flat on their face. Not one part of the Governments outline of those programs, (HAMP, HOPE, HELP, and NOPE) have been implemented anywhere near the way they were drawn in Congress. The statistical average as it relates to the rate of successful modification is less than 5% – yes, FIVE (5%) percent. Wells Fargo, Chase, Bank of America (my personal favorite) haven’t done squat for homeowners. These institutions are well oiled “cash collecting” machines. These Banks are paid $1,000.00 every time they “approve” a “trial Loan Modification“. These trial Loan Mod’s are all that is required of each financial institution, servicer, or private investor to collect their piece of the Governments cash pie.
So today we have a new program upon us, a bright shiny, and ready to fail Tax Payer backed bailout scheme. I have enclosed the details of this new “program” and the parameters as it relates to the approval process. Each file will be reviewed much like a Loan Modification request, but instead of keeping your home, you are giving it to the people that got us into this mess – ironic huh?. . .
[Fannie Mae] is implementing the Deed for Lease Program under which qualifying homeowners facing foreclosure will be able to remain in their homes by signing a lease in connection with the voluntary transfer of the property deed back to the lender.
“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for loan modifications,” 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. The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a loan modification. Under Deed for Lease, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.
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. (Seconds or private party Notes) Tenants of borrowers in this circumstance may also be eligible for leases under the program. Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income. Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. A Deed for Lease property that is subsequently sold includes an assignment of the lease to the buyer.
If you are interested in gathering further information about this program, give me a call. The only major concern I have over this latest and greatest “assistance program” is what happens when the lease is up? Do they stick you back into the same Mortgage you couldn’t afford in the first place, or do they collateralize the difference and adjust your loan balance to what Fair Market Value is? But yet the greatest piece of this very complex equation is simple – will the Government actually give you your home back???? We all know the first 750 Billion some odd dollars went nowhere? So why now when the Government has all of these properties back in their hands will they just give you your home back? If you really think about it, the Government now has collateral in their pockets – your home. Why would any investor (the Government) just “give back” what leverage they have? Remember, the true definition of Government is “not for profit” I guess we will all have to wait and see what happens with round three of the Stimulus Package. . .