Fannie Mae said Thursday that it is rolling out a new program under which it will offer market-rate leases for terms of up to a year to troubled borrowers who turn over the deeds to their homes.
The "Deed for Lease" program is designed for homeowners headed toward foreclosure who do not qualify for loan modifications. They must document that the market rate does not exceed 31% of their gross income.
Buyers of foreclosed properties are to assume the leases.
Since January, Fannie has offered month-to-month leases to tenants whose landlords have lost their properties to foreclosure. Freddie Mac has offered month-to-month leases to both tenants and former borrowers since March.
Neither of those programs appears to have generated much uptake — last month, Fannie said it had executed about 200 leases to date. The government-sponsored enterprises have said that many people opt for cash payments to help them move, and look for more stable arrangements than month-to-month leases.
Industry executives outside the GSEs have also raised doubts about whether renting to a former borrower who can afford a market rate would be better financially for the creditor than simply reducing the monthly loan payment to an equivalent amount through a modification.
Jay Ryan, a Fannie vice president, said in a press release that the 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."