Economic Populist Forum - Fannie Mae "Debt-for-Lease" program

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Topic: Fannie Mae "Debt-for-Lease" program (Read 28 times)

unlawflcombatnt
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Fannie Mae "Debt-for-Lease" program
« Thread Started on Nov 7, 2009, 12:20am »

from the Wall Street Journal

NOVEMBER 6, 2009

Fannie to Rent to Owners in Foreclosure

By NICK TIMIRAOS

"Fannie Mae will allow homeowners facing foreclosure to stay in their homes and rent them for as long as a year, as part of the government's latest effort to help troubled borrowers, while keeping more foreclosed properties from hitting the housing market.

Fannie Mae plans to allow homeowners facing foreclosure to stay in their homes and rent them.....

The "Deed for Lease" Program lets borrowers who don't qualify for loan modifications transfer their property to Fannie Mae in exchange for a lease. Borrowers-turned-tenants will pay market rents, which in most cases are lower than the cost of mortgage payments, and might be offered extensions when their leases expire.....

Fannie Mae....acquired 57,000 properties through foreclosure during the first half of the year.

Borrowers have to demonstrate they can't afford their current mortgage, but can pay the rent. The borrower's mortgage servicer has to show the borrower didn't qualify for a loan modification....

The initiative also would allow Fannie to keep inventory off already-saturated housing markets, and amounts to a bet the housing market would be stronger one year from now.

"I'm sure Fannie is hoping that when they sell the properties, the values will be higher," said David Berson, chief economist for PMI Group Inc., a mortgage insurer. "A year from now, we should be a year further into the economic recovery, and housing demand will be stronger....That will allow you to release homes that have been foreclosed upon but not put on the market."

The program could also help Fannie preserve the value of its nonperforming assets, because occupied homes are likely to hold up better than vacant homes, and rents would provide some income before the properties are sold. "If they can keep the property occupied and have at least some positive cash flow, that may end up being less worse than going the route of kicking them out and having a vacant home," said Thomas Lawler, an independent housing economist based in Leesburg, Va.

Housing advocates and some investors have long called for less disruptive alternatives to foreclosure. The program would provide a "big step" towards giving families housing security, said Dean Baker, co-director of the Center for Economic Policy and Research. The rental programs join a series of other initiatives designed to help borrowers who might not qualify for a loan modification.

Fannie will use a professional management company to handle maintenance, and properties that are sold during the lease period will include an assignment of the lease to the new owner.

The move by Fannie follows a similar effort by Freddie Mac that began offering month-to-month leases to owner-occupants who had lost their homes to foreclosure. The Fannie Mae program differs in one important respect: Fannie's foreclosed homes won't be listed for sale. In February, both companies began allowing tenants whose landlords had lost their properties to foreclosure to sign month-to-month leases....

In recent months, some industry analysts have been puzzled over why more homes haven't been put up for sale as the rate of borrowers who defaulted climbed higher. Well-intentioned efforts to keep families in their homes have led to delays that some analysts believe are prolonging the mortgage crisis by creating a "shadow" inventory of pent-up supply that will ultimately hit the market.

Separately, Fannie Mae said Thursday it would need an additional $15 billion from the U.S. Treasury after it posted an $18.9 billion net loss for the third quarter, as loans made to prime borrowers deteriorated at a faster clip. That infusion would bring the total cost so far of Fannie's bailout to $61 billion.

In the past year, the government has invested more than $110 billion in Fannie and Freddie, and it has pledged to invest as much as $200 billion in each company to keep them afloat."

« Last Edit: Nov 7, 2009, 1:17pm by unlawflcombatnt »

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jeffolie
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Re: Fannie Mae "Debt-for-Lease" probram
« Reply #1 on Nov 7, 2009, 8:05am »

The government via the GSEs will be the biggest landlord in America in a year or two because of how big the GSEs are and how overwhelmingly they hold the mortgages.

The government aka biggest landlord will operate with its typical horrible inefficiently and ineptness.

This is wrong. Tenants will not have pride of ownership.

I have expected and written here at this forum for years that the government will create a rent to own program. This would be better. But, that is not what is happened. I was wrong in this expectation, although it may yet happen latter.

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