mortgage

Rent your own home

Highlights
  • Deed for Lease program combines deed-in-lieu and lease agreement.
  • Homeowner must transfer title free and clean of any liens.
  • Lease term can be up to 12 months with renewal option.

Homeowners who can't afford their mortgage payment, but still want to live in their current home may be keen to learn more about Fannie Mae's new Deed for Lease program, which allows homeowners to sign a deed in lieu of foreclosure and then rent back their home and continue to live there.

The program, known as "D4L," is another option for homeowners who are in danger of foreclosure but aren't eligible for a loan modification, according to Fannie Mae Vice President Jay Ryan.

"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," Ryan said in a Nov. 5 statement.

The program also is intended to minimize "deterioration of neighborhoods caused by vandalism and theft to vacant homes, and the effects these have on families, communities and home price stabilization," according to a Fannie Mae document.

Deed for Lease may not help many homeowners

That's the upside. The downside is that the D4L program is riddled with so many rules and restrictions that relatively few people are likely to be able to take advantage of it. Indeed, Fannie Mae accepted only 1,996 deeds-in-lieu from homeowners in the first nine months of 2009.

What's more, critics have charged that these types of help-for-homeowners programs generally are more about favorable publicity than actual aid for borrowers.

Sean O'Toole, CEO of ForeclosureRadar.com in Discovery Bay, Calif., says such programs are "more about the headline than the reality."

Erik Weichelt, president of Weichert Elite, a real estate brokerage in San Diego, and a specialist in the sale of bank-owned foreclosed homes, says the new program may "sound nice" and "seem wonderful," but at the end of the day, homeowners may be "better served by getting on with that part of their life and starting over" in another home.

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The bottom line on whether the D4L program is a boon or a bust may depend, as such matters often do, on the homeowner's personal experiences.

"For some folks who are living in a house that's nicer than they ever would have been able to afford, getting more time there is a gift. For some folks who don't want the disruption of moving, it's a gift. For others who are bitter at the fact that they bought the house or someone convinced them to get the loan, it's a day-to-day reminder of the mistake they made," O'Toole says.

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