Fannie Mae last week announced a new Deed for Lease™ program. The new program allows borrowers to voluntarily transfer their property back to the lender and then lease back the house at market rate. The lease period is for up to 12 months, with month-to-month contract extensions after that period. The program is designed for borrowers who do not qualify for or have not been able to obtain other loan-workout solutions, such as loan modifications.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Tenants of borrowers in this circumstance also may be eligible for leases under the program. Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31 percent of their gross income.

Homeowners thinking of participating in the Deed for Lease™ program should visit Fannie Mae’s loan look-up Web site to see whether their loan is owned or guaranteed by Fannie. Mortgages backed by the Federal Housing Administration and other government agencies are not eligible for the Deed for Lease ™ program.

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Reprinted with permission from CAR.org