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New Fannie Mae Program may help more Homeowners Avoid Foreclosure

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By : Richard Ray    99 or more times read
In a new response to the foreclosure crisis, Fannie Mae has launched a new scheme to try and help homeowners stay in their homes. The Deed-for-Lease Program will allow homeowners at risk of foreclosure to stay in their homes by temporarily assigning ownership of the property to Fannie Mae. In essence, the homeowner becomes a tenant of the housing association.

The program has been launched in an effort to minimize the after-effects of foreclosure for the homeowner and the neighborhood. Foreclosure displaces families, causing all family members immense stress, as well as possible future financial difficulties. In addition, foreclosure can encourage the deterioration of neighborhoods, as homes that are empty may become targets for theft and vandalism.

Fannie Mae’s Deed-For-Lease Program is effective as of November 5, 2009, and mortgage providers are able to begin offering the service immediately.

Eligibility Requirements for Homeowners and Properties

There are a number of eligibility requirements homeowners must meet before they can apply to become part of the Deed-for-Lease Program. These include the following:

  • The mortgage must be a first-lien loan which is not backed by a federal agency such as FHA, HUD, or VA.

  • The property may comprise up to four units.

  • The home must be the mortgage-owner’s primary residence, or must be the primary residence of the tenant if the property is being leased.

  • The borrower must not be more than twelve mortgage payments in arrears, and must not be in the process of declaring bankruptcy.

  • At least three mortgage payments must have been made since the loan was originated or last modified.

  • Ownership of the title to the property must not be under question.

  • The property’s occupant must have verifiable income, and must submit to a credit review and background check. The rental payments for the property cannot total more than 31% of the occupant’s gross income.

  • The occupant must agree to be responsible for property maintenance.

There are some additional requirements for the property itself. The property must not be subject to any zoning or homeowner’s association limitations that might prevent the homeowner participating in the Deed-for-Lease Program. Once the program is in effect, the property must be able to garner sufficient rental income to cover management and maintenance costs.

How does it Work?

While there are many requirements for participation in the Deed for Lease program, applying for the program is a fairly simple process. Service providers may recommend the program to homeowners who meet Fannie Mae’s prescreen requirements. If the homeowner is interested, the provider will forward their contact details to Fannie Mae. Finally, a Fannie Mae representative will evaluate the homeowner and his or her property to determine whether a lease can be finalized.

A lease can be issued for up to twelve months. Once the term of the lease is up, the homeowner has the option to resume ownership of their home, or extend the terms of the lease for up to another twelve months.
Richard Ray, author of this article writes for the Householders Guide where you can find up to date Real Estate News and Household Information.

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