Fannie Mae Offers Rent Option to Struggling Homeowners

WASHINGTON – Homeowners who can no longer pay their mortgage may still have a way to stay in their homes. Fannie Mae, the government-controlled mortgage company, has launched a new program that allows borrowers facing foreclosure to rent their homes for up to one year.

This option gives temporary relief to struggling families. However, critics worry it could increase losses for a company already supported by billions in taxpayer funds.

How the “Deed for Lease” Program Works

Under the new Deed for Lease program, homeowners transfer ownership of their property to Fannie Mae. In return, they sign a one-year lease and may qualify for month-to-month extensions after that.

The program also helps Fannie Mae save money. It avoids the long and costly foreclosure process, which can take months to complete.

According to Jay Ryan, a vice president at Fannie Mae, the program reduces uncertainty, keeps families in their homes during transition, and supports neighborhood stability.

Credit Impact Is Less Severe

Renting through the program causes less damage to a borrower’s credit history than foreclosure.

“It shows you made a real effort to solve the problem,” said Gabe del Rio, director of homeownership at Community HousingWorks in San Diego.

Critics Prefer Loan Modifications

Not everyone supports the rental approach. Some housing experts argue that lenders should focus more on reducing monthly loan payments.

“The best solution is keeping people as homeowners,” said Mike Himes of NeighborWorks Sacramento.

Fannie Mae officials say the program targets borrowers who do not qualify for loan modifications but still want to remain in their homes.

Who Qualifies for the Program?

To qualify, homeowners must live in the property as their primary residence. They must also prove they can afford market-rate rent.

A management company sets the rent based on current market conditions.

Limited Reach So Far

Despite its benefits, the program will likely help only a small number of homeowners.

In the first nine months of the year, Fannie Mae took ownership of nearly 2,000 homes through deed-in-lieu agreements. During the same period, it repossessed about 90,000 homes through foreclosure.

With deed-in-lieu, homeowners give up ownership and leave the property without renting it back.

Concerns About Taxpayer Risk

Some critics question Fannie Mae’s true motivation. They argue the company hopes to sell the homes later at higher prices.

Peter Schiff of Euro Pacific Capital strongly disagrees with this strategy. He warns that taxpayers will end up owning too many homes and paying heavy costs.

Financial Pressure Continues for Fannie Mae

The announcement came as Fannie Mae requested an additional $15 billion in government aid. The company reported a $19.8 billion loss in the third quarter.

Since federal regulators took control in 2008, Fannie Mae and Freddie Mac have received $111 billion in taxpayer support.

Source: Yahoo News