Homeowners facing foreclosure will be allowed to rent their homes at market rates for up to a year. The program, called "Deed for Lease" was announced by government-controlled mortgage backer Fannie Mae on Thursday. Homeowners voluntarily exchange the deed to their house back to the lender for the right to rent their home at market rate. Rental rates will likely be less expensive that mortgage rates for those who purchased at the top of the housing boom. Supporters of Fannie Mae's "Deed for Lease" program say the company's actions will provide much-needed relief to those who do not qualify for a loan work-out.
The "Deed for Lease" program could potentially save money by avoiding the lengthy foreclosure process. Supporters suggest renters could safeguard abandoned homes from being vandalized and keep neighborhoods intact. To qualify, homeowners have to live in the home as the primary residence and prove that they can afford the market rent.
Critics are unimpressed by the number of homeowners who qualify. They charge that "Deeds for Lease" is meant to remove the number of foreclosures from Fannie Mae's books. The company has received billions of taxpayer dollars. Yet, MSNBC reports that of the 90,000 Fannie Mae foreclosures in the first nine months of the is year, only 2,000 homeowners would qualify.
"Taxpayers are now going to own all these houses that (Fannie Mae) should have unloaded," Peter Schiff, president of Euro Pacific Capital in Darien, Conn., told MSNBC. "It's going to cost a fortune."
Freddie Mac, Fannie Mae's sister company, started a similar program in March offering foreclosed homeowners a month-to-month rental lease. Freddie Mac has not released information concerning how many homeowners are participating.
MSNBC reports that Freddie Mac and Fannie Mae own or guarantee almost 31 million home loans worth about $5.5 trillion, about half of all U.S. mortgages. The companies have required $111 billion in federal aid since being seized by government regulators 14 months ago.
Fannie Mae's "Deeds for Lease" program is similar to government-initiated Neighborhood Preservation Act that Congress unanimously passed in July. The congressional act allows foreclosed homeowners to rent their homes for a period of up to five years with the opportunity to buy the home back again.
