Wednesday, May 12, 2010

Deed-For-Lease to avoid foreclosure?

Is it possible to stop being a homeowner… and become a renter of your EXISTING home? As strange as it sounds, this might just be possible with Fannie Mae’s “Deed for Lease” Program. This may allow you to be able to stay in your current property for awhile and avoid the disruption of moving your family.

The current program offers a lease of NO MORE than 12 months, at current market rental rates. If current rental rates are about the same as, or even higher than your current monthly mortgage, this program probably won’t help. The program is ONLY available for properties with mortgages backed by Fannie Mae. To see if Fannie Mae is the investor (backs) your mortgage, click here.

While the program has been around since November 2009… many people didn’t qualify becuase they had junior liens (second or third liens) on their property. Given the changes announced at the beginning of April with the new HAFA program… even homeowners with junior liens may now qualify for the ‘Deed for Lease’ program.

There are actually TWO steps that homeowners with Fannie Mae loans must ‘qualify’ for in order to be able to participate in the program.

1. First, you must sign over the deed (title) of your home in what is known as ‘Deed-in-Lieu’ of foreclosure. You have to qualify (apply) for this with your current lender… you can’t just sign over your deed and mail it back to them.

2. If your lender agrees to a Deed-in-Lieu, then you must sign-up for the “Deed-for-lease” program. There is a $75.00 per unit lease application fee as well.

The ‘Deed-For-Lease’ program is one of the few options available to avoid foreclosure for investor-owned properties… as the investor/owner can agree to a deed-in-lieu of foreclosure and their tenants can apply for the Deed-for-Lease program.

For your property to be eligible:
  • The property must be livable (qualify for a certificate of occupancy according to CURRENT local rules, codes). Repairs might be necessary to qualify or to bring the property into compliance – the program does allow for 30 days to bring it into compliance.
  • The property cannot be the focus (or participate in) any corporate, government or community neighborhood stabilization plan.
  • The property will be inspected, and an independent inspection report agrees that you have kept the property in good condition.
  • The market rental income must cover ongoing maintenance and management costs.
  • If the property is part of a homeowner's association, it must allow rental properties.

For you or your tenant to be eligible:
  • The market-rate rent on the property must be less than 31% of your gross income (unemployment income counts).
  • The number of occupants must be in compliance with local laws and homeowner association rules.
  • Occupants signing the lease must agree to a credit review and all occupants over age 18 must have a background check.
  • No sign or reports of illegal activities conducted at the property.
  • The property will be use for a personal residence.


 As long as your property is eligible, you will be assigned to a property manager who will do the inspection and manage the property once you are accepted into the program.
The property manager will meet with you within 10 days of filing your application to the “Deed for Lease” program. At the meeting you will need to fill out a formal application and pay a $75 processing fee for the application. If it's a multi-unit property, the $75 fee will be collected for each unit. The property manager will then conduct an inspection of the property to be sure it meets local codes and regulations and that the property has been adequately maintained (see above).
The advantage to this type of program is that it allows you time to start rebuilding your credit score and allows you to free up additional funds to start paying down other debt. Currently, however, the maximum lease time is 12 months… you may only be delaying the inevitable move.

Remember... you can't just sign your Deed and mail it back to the bank.  There are LOTS of steps that must be taken.  Also.. BE CAREFUL. There are LOTS of for-profit and "Foreclosure Rescue" scam companies that would love to have you sign over your deed, and will leave you without a home and without recourse.

Are you interested in learning more about the Deed-For-Lease program... or other ways to avoid or prevent foreclosure in Minnesota? Contact your local FREE (non-profit) Housing Counseling agency today to explore your options.

2 comments:

  1. This program really needs to be shared with the public more. There are countless times in the past few years where tenants, who paid their rent, had to move and find a new place because the landlord did not share the truth. If investors know they can leave the home with dignity without destroying the lives of their tenants, I believe this program would be used more in Northern Virginia.

    ReplyDelete
  2. Thank you for sharing the information regarding foreclosures. Not everyone can be helped in the way they want but the goal is to avoid foreclosure. Foreclosures solutions and short sales offer ways and help in order to keep your home.

    KL - Realtor

    http://www.minnesotashortsales.net
    (763)795-1824

    ReplyDelete

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