Fannie Will Rent to Owners in Foreclosure
November 11, 2009 1:30 PM
Fannie Mae has announced a new "Deed for Lease" program to allow homeowners facing foreclosure to remain in their homes and rent them for up to a year. Typical rents today are far less than the mortgage payments on the same home. This new program will allow many homeowners who have seen their incomes reduced because of the economy stay in their homes. The Administration has tried several programs to reduce foreclosures through refinancing, but private mortgage lenders have been largely uncooperative.
The Deed for Lease program is an outstanding idea. It allows the government to generate fair market rent revenue from foreclosed properties it would lose money on if sold in today's market. It helps many homeowners who are innocent victims of mortgage fraud or job losses/cutbacks as a result of a mortgage lender-induced recession. Home values continue to drop, and this program, like the home buyers tax credit extension just passed by Congress, will help prevent home values from tanking even more and possibly setting off another economic meltdown.
Many of these homeowners will at some point find another job or go back to full work weeks . They can then afford to buy their home back directly from Fannie, which will also save taxpayers the 6% real estate commission Fannie would have to pay if it sold through traditional channels.
Mortgage lenders should consider a similar program. Growing numbers of underwater homeowners who are innocent victims of job losses/cutbacks are simply moving out and mailing the house keys back to the mortgage lenders. Consumers who own financial services firms through their IRAs, 401Ks, pension plans or investment portfolios are being poorly served by financial services firm executives who do not take steps similar to Fannie's to protect their shareholders' assets. They hurt stockholders and the economy previously by lending the stockholders' money to home buyers without documenting their income or assets, or otherwise ignoring sound underwriting practices. It is time for the mortgage lenders to step up to the plate and help undo the mess they created.
The Deed for Lease program is an outstanding idea. It allows the government to generate fair market rent revenue from foreclosed properties it would lose money on if sold in today's market. It helps many homeowners who are innocent victims of mortgage fraud or job losses/cutbacks as a result of a mortgage lender-induced recession. Home values continue to drop, and this program, like the home buyers tax credit extension just passed by Congress, will help prevent home values from tanking even more and possibly setting off another economic meltdown.
Many of these homeowners will at some point find another job or go back to full work weeks . They can then afford to buy their home back directly from Fannie, which will also save taxpayers the 6% real estate commission Fannie would have to pay if it sold through traditional channels.
Mortgage lenders should consider a similar program. Growing numbers of underwater homeowners who are innocent victims of job losses/cutbacks are simply moving out and mailing the house keys back to the mortgage lenders. Consumers who own financial services firms through their IRAs, 401Ks, pension plans or investment portfolios are being poorly served by financial services firm executives who do not take steps similar to Fannie's to protect their shareholders' assets. They hurt stockholders and the economy previously by lending the stockholders' money to home buyers without documenting their income or assets, or otherwise ignoring sound underwriting practices. It is time for the mortgage lenders to step up to the plate and help undo the mess they created.
Leave a comment