Having taken back 57,000 properties through foreclosure in the first half of 2009, “bringing its total real-estate owned inventory to 63,000 properties valued at $6 billion,” Fannie Mae is rolling out a “Deed for Lease Program” in the hopes of generating some cash from the non-performing assets and mitigating the near-term impact of so-called “shadow inventory” on the market.
The Deed for Lease Program, which Fannie plans to roll out on Thursday, will offer borrowers who fail to complete or don’t qualify for a loan modification or other workout to deed their property to the lender in exchange for a lease. Borrowers-turned-tenants will be able to sign leases of up to 12 months and will pay market rents, which in most cases are lower than the cost of mortgage payments.
Borrowers who haven’t missed any mortgage payments aren’t eligible for the program, and the borrower’s mortgage servicer would have to show that a borrower isn’t eligible for a loan modification before the homeowner could apply for the Deed for Lease program.
Of course collecting rents from those who have already lost their homes to foreclosure might be a challenge. And while the tipster that first pointed out the story notes, “Good news for RE investors like me, that’s fo’ shore!”, we’d argue it’s the opposite.
∙ Fannie Mae to Rent Foreclosed Homes Back to Borrowers [WSJ]