Mortgage Law, Mortgage Modification, and Foreclosure: Fannie Mae's Deed for Lease Program Part I
What options are there for people who can't afford their mortgage, can't qualify for a mortgage modification, and can't or won't file Bankruptcy to stay in their home? Are there other options to stay in your home? The answer is yes. In another post I will go over Short Sale options where you can rent from the person who purchases your home. In this series, however, I would like to go over Fannie Mae's Deed-for-Lease Program.
This is a program designed to work in tandem with a Deed-In-Lieu. This is where you would voluntarily transfer the deed to your lender or Fanny Mae and if you qualify, they will rent the home back to you in 12 months lease(s). There are pre-screening qualifications as well as instructions for servicers/lenders and borrowers. Let's first go over the main qualification requirements.
The Program eligibility is as follows:
- The loan has to be a first mortgage in a one to four unit dwelling.
- The loan can't be an FHA, HUD, VA, or Rural Development loan.
- The property must be a primary dwelling for the borrower or their tenant, no vacation homes.
- The loan has to have had at least three payments made on it. You can't get a loan in January and then stop making payments in February and eventually qualify for this program.
- You also can't be more than 12 months late on the loan payments.
- You can't be involved in a Bankruptcy or litigation on the property.
- There can't be any title issues that could result in litigation.
- You must have income, in other words they want to make sure you can pay rent.
No those are the main program requirements. There are of course other sensible requirements such as: Making sure there are no zoning restrictions on renting, making sure the home is habitable, that the rental income will cover ongoing maintenance and management costs.
Finally, there are specific occupant eligibility requirements. For instance the magic 31% of gross income. In other words, rental payments are set based on certain criteria and those payments can't be more than 31% of the occupant's gross income or the lease won't be offered. The occupant would also have to agree to maintain the property, get pet insurance if appropriate, get a credit check, and generally be a good tenant.
Next time I want to go over how the entire process works a little better. Stay Tuned and thanks for reading!
