The quasi-government mortgage insuring agency calls its program Deed for Lease. It could make Fannie Mae one of the largest residential landlords in the U.S.

Here is what Deed for Lease involves:

* Homeowners facing foreclosure and who can’t qualify for loan modifications, sign over their house deed to Fannie Mae and start paying market rent – in most cases, lower than the homeowner’s mortgage payments.

* The lease is for one year. Then the property will be sold if the owner is unable to make up the regular mortgage payment shortfall.

* Borrowers have to show they can’t afford their current mortgage, but can pay the rent.

* Borrowers’ mortgage servicer has to also show the borrower didn’t qualify for a loan modification.

* Deed for Lease is similar to Freddie Mac’s current program except that Fannie Mae’s foreclosed homes won’t be listed for sale.

* Deed for Lease will keep more foreclosed properties from hitting the housing market.

* Fannie Mae acquired 57,000 properties through foreclosure in the first half of this year.

“If you keep more people in their homes, it’s better for the community,” says Jay Ryan, vice president of equity investments at Fannie Mae. “Hopefully, less foreclosure product on the market will help stabilize those communities.”

More than a few market watchers maintain Fannie Mae, with its new program, is betting the housing market will be stronger one year from now.

“I’m sure Fannie is hoping that when they sell the properties, the values will be higher,” says David W. Berson, chief economist for mortgage insuror PMI Group Inc. tells The Wall Street Journal.

“A year from now, we should be a year further into the economic recovery, and housing demand will be stronger,” Berson adds. “That will allow you to release homes that have ben foreclosed upon, but not put on the market.”

Occupied homes are likely to hold up better than vacant homes and rents would provide some income before the properties are sold, points out Thomas Lawler, a Leesburg, VA-based independent housing economist.

“If they can keep the property occupied and have at least some positive cash flow, that may end up being less worse than going the route of kicking them out and having a vacant home,” says Lawler.

In Freddie Mac’s program, about two-thirds of owner-occupants who have been offered monthly leases, have taken them. The breakdown of owner-occupants to tenants who have rented under the program is about 2 to 1, according to the WSJ.

Ingrid Beckles, senior vice president of default asset management at Freddie Mac, says the agency is considering extending longer-term leases to some troubled homeowners.

“We’re looking into our options because there are certain markets where there is just so much inventory on the market,” she says.

Both agencies have been under the Congressional microscope for some time because of their troubled financials.

Fannie Mae said Thursday it would need an additional $15 billion from the Treasury after it posted an $18.9 billion net loss for the third quarter. The reason: loans made to prime borrowers deteriorated at a faster clip. That infusion would bring the total cost so far of Fannie’s bailout to $61 billion.

In the past year, the government has invested more than $110 billion in Fannie and Freddie, and it has pledged to invest as much as $200 billion in each company to keep them afloat, according to the WSJ.

The Deed for Lease program “would provide a big step towards giving families housing security,” says Dean Baker, co-director of the Center for Economic Policy and Research based in Washington, DC.

The quasi-government mortgage insuring agency calls its program Deed for Lease. It could make Fannie Mae one of the largest residential landlords in the U.S.

Here is what Deed for Lease involves:

* Homeowners facing foreclosure and who can’t qualify for loan modifications, sign over their house deed to Fannie Mae and start paying market rent – in most cases, lower than the homeowner’s mortgage payments.

* The lease is for one year. Then the property will be sold if the owner is unable to make up the regular mortgage payment shortfall.

* Borrowers have to show they can’t afford their current mortgage, but can pay the rent.

* Borrowers’ mortgage servicer has to also show the borrower didn’t qualify for a loan modification.

* Deed for Lease is similar to Freddie Mac’s current program except that Fannie Mae’s foreclosed homes won’t be listed for sale.

* Deed for Lease will keep more foreclosed properties from hitting the housing market.

* Fannie Mae acquired 57,000 properties through foreclosure in the first half of this year.

“If you keep more people in their homes, it’s better for the community,” says Jay Ryan, vice president of equity investments at Fannie Mae. “Hopefully, less foreclosure product on the market will help stabilize those communities.”

More than a few market watchers maintain Fannie Mae, with its new program, is betting the housing market will be stronger one year from now.

“I’m sure Fannie is hoping that when they sell the properties, the values will be higher,” says David W. Berson, chief economist for mortgage insuror PMI Group Inc. tells The Wall Street Journal.

“A year from now, we should be a year further into the economic recovery, and housing demand will be stronger,” Berson adds. “That will allow you to release homes that have ben foreclosed upon, but not put on the market.”

Occupied homes are likely to hold up better than vacant homes and rents would provide some income before the properties are sold, points out Thomas Lawler, a Leesburg, VA-based independent housing economist.

“If they can keep the property occupied and have at least some positive cash flow, that may end up being less worse than going the route of kicking them out and having a vacant home,” says Lawler.

In Freddie Mac’s program, about two-thirds of owner-occupants who have been offered monthly leases, have taken them. The breakdown of owner-occupants to tenants who have rented under the program is about 2 to 1, according to the WSJ.

Ingrid Beckles, senior vice president of default asset management at Freddie Mac, says the agency is considering extending longer-term leases to some troubled homeowners.

“We’re looking into our options because there are certain markets where there is just so much inventory on the market,” she says.

Both agencies have been under the Congressional microscope for some time because of their troubled financials.

Fannie Mae said Thursday it would need an additional $15 billion from the Treasury after it posted an $18.9 billion net loss for the third quarter. The reason: loans made to prime borrowers deteriorated at a faster clip. That infusion would bring the total cost so far of Fannie’s bailout to $61 billion.

In the past year, the government has invested more than $110 billion in Fannie and Freddie, and it has pledged to invest as much as $200 billion in each company to keep them afloat, according to the WSJ.

The Deed for Lease program “would provide a big step towards giving families housing security,” says Dean Baker, co-director of the Center for Economic Policy and Research based in Washington, DC.

The Deed for Lease program lets homeowners transfer the deed back to their lender and then sign a lease to remain in the home. The effort is aimed at borrowers with mortgages owned or guaranteed by Fannie Mae who do not qualify for or cannot sustain a loan modification. Borrowers must live in the home as their primary residence and must be released from any subordinate liens.

The program aims to reduce the number of foreclosed properties being abandoned because they often fall into disrepair and hurt the surrounding homes’ values. Also, it keeps a roof over troubled borrowers’ heads and a steady stream of income coming from the property.

“This 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,” said Jay Ryan, vice president of Fannie Mae, a mortgage-guarantee firm under federal government control.

Homeowners must show they can afford market rent, but that payment cannot be more than 31% of the borrower’s pre-tax income. Leases may be up to 12 months, with the possibility of renewal or month-to-month extensions. If the property is sold, the new owner picks up the lease.

Stopping foreclosures

While this initiative is not part of the Obama administration’s loan modification program, the White House is leaning heavily on Fannie Mae and its sister firm, Freddie Mac, to assist in stemming the foreclosure crisis.

Freddie Mac launched a program in January that allowed borrowers to stay in their homes on a month-to-month basis after they go through foreclosure.

Despite the government and financial industry initiatives, foreclosures hit an all-time high in the third quarter. During that time, 937,840 homes received a foreclosure letter — whether a default notice, auction notice or bank repossession, according to RealtyTrac.

Last month, Treasury officials announced that 500,000 troubled borrowers have been put into trial modifications under the president’s plan. The program calls for eligible homeowners to pay no more than 31% of their pre-tax income toward their mortgages.

At the same time as it tries to ramp up its loan modification program, the administration is looking for ways to help those not eligible for adjustments. In May, officials unveiled a program to incent borrowers and loan servicers to participate in short sales and deeds in lieu. Under that initiative, borrowers get up to $1,500 to assist with relocation expenses and Treasury pays servicers $1,000 when the deal is completed.

Short sales, in which the home is sold for less than the mortgage balance and loan servicers may forgive the difference, and deeds in lieu, in which borrowers voluntarily forfeit the deed and the debt may be erased, are faster and cheaper than foreclosure.

“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications,” said Jay Ryan, Vice President of Fannie Mae. “This 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.”

The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under Deed for Lease, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.

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 may also 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% of their gross income.

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. A Deed for Lease property that is subsequently sold includes an assignment of the lease to the buyer.

For additional information about the Deed for Lease Program, including full details on program eligibility, please review the Guide Announcement on www.efanniemae.com.

“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications,” said Jay Ryan, Vice President of Fannie Mae. “This 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.”

The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under Deed for Lease, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.

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 may also 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% of their gross income.

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. A Deed for Lease property that is subsequently sold includes an assignment of the lease to the buyer.

For additional information about the Deed for Lease Program, including full details on program eligibility, please review the Guide Announcement on www.efanniemae.com.

INDIO, Calif. — Officials at a Citigroup Inc. office in St. Louis placed a call to this desert town recently. The bank had caught word that Indio was coming after the lending giant with fines and threats of criminal charges. The offense: an algae-infested swimming pool at 79760 Eagle Bend Court.

Citigroup wound up in charge of the foreclosed home, one of thousands of such properties it was managing across the country. But last year, Indio passed a law that allowed it to charge banks with a criminal misdemeanor if they allowed a home to fall into disrepair.

“If I need to do it, I’ll say, ‘Mr. Bank President, if you don’t come and take care of your property, we’re going to come arrest you and take you to court in California,’” says Brad Ramos, Indio’s long-serving police chief.

The hard-line approach is part of this town’s attempt to gain leverage over some of the nation’s largest lenders. A couple of years ago, Indio was a real-estate bonanza. Old date farms were closing down, sprouting subdivisions in their places. Today it’s a different scene with one in 10 houses either in default or foreclosure.

Read Full Article >>

INDIO, Calif. — Officials at a Citigroup Inc. office in St. Louis placed a call to this desert town recently. The bank had caught word that Indio was coming after the lending giant with fines and threats of criminal charges. The offense: an algae-infested swimming pool at 79760 Eagle Bend Court.

Citigroup wound up in charge of the foreclosed home, one of thousands of such properties it was managing across the country. But last year, Indio passed a law that allowed it to charge banks with a criminal misdemeanor if they allowed a home to fall into disrepair.

“If I need to do it, I’ll say, ‘Mr. Bank President, if you don’t come and take care of your property, we’re going to come arrest you and take you to court in California,’” says Brad Ramos, Indio’s long-serving police chief.

The hard-line approach is part of this town’s attempt to gain leverage over some of the nation’s largest lenders. A couple of years ago, Indio was a real-estate bonanza. Old date farms were closing down, sprouting subdivisions in their places. Today it’s a different scene with one in 10 houses either in default or foreclosure.

Read Full Article >>

Read Full Article >>

SAN MARCOS —- Faced with a proliferation of dead lawns and weed-filled yards at foreclosed homes, city officials are hoping to use a new state law to force banks and mortgage companies to maintain the properties they take back.

Karl Schwarm, San Marcos’ director of housing and neighborhood services, said last week that he plans to ask the City Council this month to let the city levy fines of up to $1,000 a day against owners who fail to keep up foreclosed properties.

Such fines became possible in July when Gov. Arnold Schwarzenegger signed Senate Bill 1137 into law. Formally known as the Residential Mortgage Loans Foreclosures Procedures, the law spells out the responsibilities regarding foreclosed properties of banks and mortgage companies.

San Marcos considered using the law last month after City Councilman Chris Orlando noted that foreclosed properties were creating blight in otherwise attractive neighborhoods.
Read Full Article >>