: Fannie Mae Is Now My Landlord?

Fannie Mae Is Now My Landlord?

Update (BORROWERS' INSTRUCTIONS):   https://www.efanniemae.com/sf/servicing/d4l/pdf/d4lborrowerinstructions.pdf

Fannie Mae Is Now My Landlord?

Well when you think they have thought of everything, Fannie is now in the Landlord business!!  I am not sure how I feel about this and whether or not it will realistically make a difference in the process of filtering the problems out of the market.  However, it does help the struggling homeowners from becoming

foreclosure crisis, fannie mae

homeless which is a good thing (Just in case, if you haven't heard, homeslessness is on the rise and it partly does have a relationship to the foreclosure problem). 

So what does this all mean?  I suggest busting out the glasses and get reading.

fannie mae, Deed for Lease, foreclosureFannie Mae announced Thursday that it will allow troubled homeowners lease their homes versus losing them through foreclosure and eviction. The new program is directed at providing greater home security to distressed borrowers who can't afford their mortgage payments and do not qualify for a loan modification, however who can  able to afford the rent.

The program is designed so that borrowers transfer their property deed to Fannie, this is also known as a deed-in-lieu of foreclosure. A deed-in-lieu will adversely affect a borrower's credit score, but it isn't as damaging as a straight-up foreclosure, even though the end result is the same which is that "Fannie gets back the property".

In the new "Deed for Lease" program, borrowers will need to:

  • Qualify for a deed-in-lieu under Fannie's current guidelines
  • Demonstrate that they have enough income to pay a market rent, they'll be required to sign a lease for up to 12 months. 

Here's a few question and answers about the program:

How do I know if Fannie owns or guarantees my loan?

Fannie Mae has a loan look-up Web site that lets borrowers see whether their loan is held or backed by Fannie, and therefore eligible for the program. Mortgages backed by the FHA and other government agencies don't qualify.

Can homeowners qualify for the program if they're current on the mortgage?

No. The program is open only to borrowers who have missed a payment and who therefore can show that they can't afford their current mortgage payments. A borrower's mortgage servicer must also show that the borrower isn't eligible for a loan modification. Potential tenants have to demonstrate that market rent wouldn't exceed 31% of their monthly gross income, and borrowers who are 12 or more payments past due on their mortgage aren't eligible.

Could borrowers-turned-tenants buy their home back when the lease expires?

Unlikely. Fannie says that at the end of the initial lease term, they may choose to extend the lease or "offer for sale to any qualified home buyer." Most borrowers who have recently missed mortgage payments and executed a deed-in-lieu probably won't have strong enough credit or enough cash to be able to buy a home.

Can borrowers intentionally default in order to be eligible for the lease program? A

gain, it's unlikely. Fannie says that "borrowers would not qualify for a deed-in-lieu, and therefore not qualify for a deed for lease, if it is determined that they can afford their current mortgage payments."

Are there any other restrictions?

Second lien mortgages aren't eligible, and any subordinate liens secured against the borrower must be released. Borrowers can't be involved in an active bankruptcy proceeding and aren't parties to any litigation on the property or the loan. Properties also couldn't be rented if rented homes would violate zoning or homeowners' association rules.

Who will manage the properties?

Fannie Mae has contracted with a national property management company to handle maintenance and property management. Here's a full list of rules and regulationsFannie's FAQ, and a page that includes (UPDATED) borrower instructions for the program .

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Comment balloon 46 commentsTed Canto • November 07 2009 01:39PM

Comments

Socialism at its ultimate!  First the Clinton Admisistration put pressure on Fannie Mae as well as others to make  high risk loans.  and now when these peopel default, the governament can now, as their landloard, dictate they way they live in their house. Lenin was right when he said that America will fall into communist's hands "like a ripe fruit".  When will Americans wake up and stop our downward spiral?

Posted by Jim Dunlap (Roberts Realty) almost 9 years ago

Well Jim.. I wouldn't go that far.. In part it will do some good.  You stated "dictate they way they live in their house".  The fact is that most of these people will not have a home otherwise. I can tell you that many people that I know and on a personal level, have not necessarily lost their homes from being deadbeats (although I am sure there are a fair share).  They lost their homes because they lost their jobs.   As I stated, I not sure really how I feel about this yet, however, this is certain, I much rather the government lease out the home to that little girl and her mother in the picture rather than see them on the street.

Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago
In the words of Gary Vaynerchuk said to a room full of RE Pros.. "Stop whining, Shut the f@!k up and get to work.
Posted by Anonymous almost 9 years ago
Alix.. Not sure what you mean but as I said it might not be a bad thing. Anonymous.. Gary did say that! You obviously were at the same seminar or heard him say that before. Real funny! I agree, a lot of whiners in our industry. I focus on solutions and opportunities. I will use this info. to help my friends and clients from ending up on the street.
Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

Despite the fact that it does seem a bit socialist, I do believe this isn't necessarily a bad thing.  Although I don't know what long-term affects this will have on the actual market, I do believe that any option to help a distressed homeowner will, eventually, improve our economy.  The affects may not be seen immediately, but knowing that some families can rest easily and stay in their homes is enough for me. 

Posted by Jessica Steele (Welcome Home Realty) almost 9 years ago

Thanks for the information in your post.  Whether or not I personally like, dislike, agree or disagree with all of the changes in programs directly or indirectly related to the economic difficulties over the last couple of years doesn't matter.  We as an industry can only work for our clients within the rules as they currently are.

So, let's do our absolute best to stay informed and educated so we can help as many clients as possible.  Working together will help improve the economy.  I agree with Jessica.

Posted by Ken Speer (Alpha Global Associates) almost 9 years ago
Jessica... We are on the same level. I am more than happy to put my ideological ideas aside if it means it will 'REALL' help Americans. The more I think about it, the more I believe this program isn't a bad thing. Not ideal but nothing is.. So no need to be unrealistic now.
Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

How can we keep having conversations about the relative "value" of what the banks and government are up to? I just read yet another article in the most-recent AARP bulletin about a couple in upstate NY who have a fixed-rate mortgage they've been paying on for 11 years, their small business went south and they faced foreclosure.

These are people who no doubt put 10-20% or more down on their purchase and have paid mostly-interest on their loan for 11 years. The underwriter has pocketed all that -- probably close to, or even more than, the purchase price of the house. The fact that they would face foreclosure and eviction is outrageous!

When will we rise up and take back the banks, which we, the People, own? With a bank bailout cost of more than $42,000 for every man, woman and child in the U.S., isn't it obvious we should have ownership of these institutions? In what other case would you invest in a business without an ownership share?

Why are we not demanding that banks be run as non-profit credit unions, co-owned by us, the member-owners? Shareholders be damned! It continues to be Wall Street's shennanigans that undermine the stability of currencies worldwide, with more than 6 times the global gross national product ($575 trillion) in unregulated derivitives still being traded! And the banks will not loan back our money because they're making more than ever in government treasuries and other investment vehicles...so why risk dealing with citizens? Who cares if people lose their homes? Too bad for them, eh? Yes, and too bad as our country continues to be undermined by the greed of a few.

While some people may jump to the nonsense of villifying help for our citizens as "socialism," (the best examples of which are our fire and police departments and public schools), this demise our citizenry and society by the banks not lending back to us our own money, is corporatocracy and tyranny at its worst!

Fannie Mae's stealing of homes to lease them back to those who "qualify", after having paid interest on them for years, is a travesty. I am sick of the argument for supporting institutions and systems that have not only failed us but continue to screw us.

Posted by Aysha Griffin (GreenRoads Realty (formerly Go Realty)) almost 9 years ago

"Can homeowners qualify for the program if they're current on the mortgage?

No. The program is open only to borrowers who have missed a payment and who therefore can show that they can't afford their current mortgage payments."

That's great...more people will intentionally miss payments thinking they can qualify for another government program. I spoke to literally 100 or more borrowers who thought they could get a loan modification if they intentionally missed payments.

Posted by Eric J, Dream Home Financing (Eric J - Dream Home Financing) almost 9 years ago

We had heard that this was happening.  One of the bright sides we see is that it keeps an excessive amount of homes from flooding the marketplace and continuing to drive prices down.

Great BLOG and thanks for letting us Re-Blog It!  Joy

Posted by Joy Carter & Jeff Booker Brother and Sister Team, Trust Your Family's Move To Our Expertise! (Keller Williams Parkland/Coral Springs Realty-GreatFloridaHomes Team) almost 9 years ago

I and several others have posted on this.  Soon I expect the banks will do the same thing.  Then open the vacants to renters.  Then soon we will all live in government housing the some idiot feels is right for our family.

Posted by Gene Riemenschneider, Turning Houses into Homes (Home Point Real Estate) almost 9 years ago

This is a disaster waiting to happen and the homeowners are not going to come out on the bright side if the banks have anything to do with it.  It's being touted as helping the homeowner but I seriously doubt it's going to work that way.  It's all about the banks PR spin on helping the owner.  How about the fact that the banks can't afford to foreclose on these homes and have the market prices further depressed?  They loose more $$, has nothing to do with generosity.

Posted by Lyn Sims, Schaumburg IL Real Estate (RE/MAX Suburban) almost 9 years ago
Dream Home- The program is not designed for someone who is necessarily behind rather the people who are actually losing the home (ie; In Lieu Of Foreclosure). So to say it is the same thing is totallt ridiculous and not even close to modifying their loan. They do not get to keep the home (like a modificatiion) and they only get to live in the house no more than 1 yr at which time the house is sold. This isn't bad for the taxpayers or investors since this provides and opportunity for prices to stabilize which equates to less losses in home values. Get your out of the trees and start seeing beyonf the forest. Ideology can be so blinding and dumb at times. Gene, again your comment has some merit but to assume that this will become some socialist housing program is kind of..well.. dumb. *1st) this program is for people who are going to lose their home. They do not get to keep it. After 1yr they are out and the property is sold. *2nd) This does help to prevent a flooding of inventory onto the market. Therefore stabilizing prices/ values. *3rd) The banks do not want to rent or become landlords to their properties. However, they need they need to stop some of their bleeding. *4th) Rent out their Vacant properties? I hope me repeating the statement paints how ridiculous that sounds. I work with the President of the Assoc. of REO brokers and I can tell you that is the last thing the banks want to do. I can understand some of the frustrations but let's get out of this whining. Too much whining in this industry and country. In the words of Gary Vaynerchuk said to a room full of RE Pros.. "Stop whining, Shut the f@!k up and get to work.
Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

I had heard that some of the banks were leasing out properties so they don't have to sell them all now and keep prices under control. I don't think anything surprises me anymore.

Posted by Dianne Hicks (Realty ONE Group) almost 9 years ago
Lyn- I totally agree. I am not mistaken. This is more about profit than philanthropy. You are right that they can't afford the foreclosures. However, many of us in AR keep talking against Gov't involvement then we start talking against banks aka businesses, while stating how businesses should be ledt alone. I am not sure what the direction of all the bickering is all about (no solutions). However, I do still see some benefits from this at the business level. I am pragmatic and not ideological about these things. I would do whatever is necessary if I was losing Billions of dollars.
Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago
Dianne, they are not renting vacant homes just the homes that are occupied by the distressed owners. Most banks are waitinng for a moderate rate of inflation so they can sell off their liabilities and also make more moeny on the inevitable higher interest rates to cut some of the losses. It's smart business no matter how much we do not like it.
Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

This may help to stabilize the home market.  As we all know a vacant run down house effects the whole neighborhood. This could help to get market prices for the homes. Which will help those owners who need to refi a re-setting loan. Which again helps us sell homes. Without us having to go through that short-sale non-sense. This is not socialism--that is where the government tells you where to live and they pay the bills for you. These people are still free to go anywhere they want to.  And they still have to pay for where they live. It is just a way to keep the markets from totally crumbing when the hundreds of thousands of loans are subject to reset. Without this--maybe another mass exodus of Realtors. With this-- maybe the  hopes of making a decent living in real estate once again.

Posted by Al Dobbs (ADD Real Estate) almost 9 years ago
AD- Way to look beyond the trees. I wasn't to happy upon hearing about it but thinking it through, it isn't a bad idea at all.
Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

Hi Ted,  Great post.  Anything which will tend to bring some stability to the market and help ease the burden of the sellers makes sense.

Posted by Bill Gillhespy, Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos (16 Sunview Blvd) almost 9 years ago

Instead of another vacant house coming on the market in your neighborhood there is another rental.

Instead of foreclosures being dumped on the market, depressing prices, houses are being rented.

Instead of vacant houses being allowed to deteriorate and become blighted and cause the neighbors distress, houses are occupied.

 Instead of a family whose house has been lost to foreclosure having to search for housing, they have already found it.

John Juarez, REALTOR

Windermere Properties of the East Bay

John@CarlMedford.com

510-673-0686

Posted by John Juarez, ePRO, SRES, GRI, PMN (The Medford Real Estate Team) almost 9 years ago
John- Gracias por entender! You simplified the picture.
Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago
Hello Ted, So... Are you starting to believe that all of these programs are an attempt to artificially keep home values high?? I've heard that Fannie Mae has around 60,000 homes now with only around 12,000 of them available for sale. Too much debt has also contributed to homelessness...
Posted by Paul Francis, Las Vegas Real Estate Agent - Summerlin Homes (Francis Group Real Estate) almost 9 years ago
Paul- I do believe that. I wouldn't say it is that simple. I think they are hedging their bets on an inflationary boom (look it up, best person to google on this is H.L. Quist). Inflation is soon to come and that will spur a boom therefore higher prices, rates, more jobs and spending = higher profits. Of course this is a theory but one that has some merit and history on it's side. To understand it better check out H.L. Quist. At worse, you owe it to your professional knowledge.
Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago
Paul- I do believe that. I wouldn't say it is that simple. I think they are hedging their bets on an inflationary boom (look it up, best person to google on this is H.L. Quist). Inflation is soon to come and that will spur a boom therefore higher prices, rates, more jobs and spending = higher profits. Of course this is a theory but one that has some merit and history on it's side. To understand it better check out H.L. Quist. At worse, you owe it to your professional knowledge.
Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago
Paul- I do believe that. I wouldn't say it is that simple. I think they are hedging their bets on an inflationary boom (look it up, best person to google on this is H.L. Quist). Inflation is soon to come and that will spur a boom therefore higher prices, rates, more jobs and spending = higher profits. Of course this is a theory but one that has some merit and history on it's side. To understand it better check out H.L. Quist. At worse, you owe it to your professional knowledge.
Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago
Ted, Well aware of what happens when the printing presses are in overdrive... We'll all be paying for this sooner or later...
Posted by Paul Francis, Las Vegas Real Estate Agent - Summerlin Homes (Francis Group Real Estate) almost 9 years ago

Thanks for explaining how this works.  I didn't know the details of this program.

Posted by Marian Pierre-Louis, Metrowest Boston (Fieldstone Historic Research) almost 9 years ago

Great, well written post.  My opinion is that it's all about lenders making money one way or another.  How does someone who can't afford their mortgage afford to pay market rate rent? 

Posted by Catherine Condon almost 9 years ago

Ted, it will help stem the tide of foreclosures on the horizon with the Alt-A loans.

Posted by Sharon Alters, Realtor - Homes for Sale Fleming Island FL (Coldwell Banker Vanguard Realty - 904-673-2308) almost 9 years ago

This sounds good Jim, but I wonder how many people will actually be able to take advantage of it.

Posted by Wayne B. Pruner, Tigard Oregon Homes for Sale, Realtor, GRI (Oregon First) almost 9 years ago

Great Post.

A friend of mine called BOFA and asked about qualifying for a short sale-before they were in default (husband lost a job) -  The response was NO because they were up to date with their mortgage!!! So.. I get the call asking if she should stop payment.  WOW --  I hope people won't intentionally miss payments thinking they can qualify for another program.  

Posted by Inez Meehan (Keller Williams ) almost 9 years ago

By the way... do you think the Mark to Market accounting rule change led to this? How are these properties being reported on the books?

Posted by Paul Francis, Las Vegas Real Estate Agent - Summerlin Homes (Francis Group Real Estate) almost 9 years ago

Banks aren't allowed to get into the real estate selling business, but they can get into the landlord business.  This whole thing gets crazier every day.

Posted by Mike Henderson, HUD Home Hub - 303-949-5848 (Your complete source for buying HUD homes) almost 9 years ago

Jim comments in post #1: "Socialism at its ultimate!  . . .  Lenin was right when he said that America will fall into communist's hands "like a ripe fruit".  When will Americans wake up and stop our downward spiral?"

This kind of thinking demonstrates a lack of any understanding of the basic laws of economics! But it should be a wake up call to those of us who are willing to think things thru without the filter of failed ideologies. I believe that Communism has largely been discredited everywhere but, apparently, not in Jim's head. 

Solutions to problems must be given a fair hearing, as we are all in uncharted waters here. It is apparent that we can not just sit here and do nothing while criticizing those who are working on solutions. The current Fanny Mae landlording issue may turn out to be problematic, but it may have some benefits. At least give it a chance.

"This is a great time to buy a house".

Akron, Ohio

Posted by Thomas McCombs (Century 21 HomeStar) almost 9 years ago
Thoms- I agree, the idea of Communism is pretty over the top. However, as an agent from AR emailed me personally to say that people like Jim are being driven by fear. She is right! Fear has been used a lot in the last 9 years. I am positive that Jim is extremely intelligent but has unfortunately allowed Fear to cloud his judgement. You are correct in saying unchartered territory. No President has faced this problem in our history. Intertesting trivia; Who has the current Presidential administration hired to assist in their economic recovery strategy? One of Ronald Reagan's chief economists and John McCain's economic counsel. The point is there is a bipartisan of "not sure what to do next!" This problem is too big for whiners and naysayers to control and do nothing.
Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

I somewhat have to agree with Catherine above, I've never seen a rental payment for a home that was cheaper than what you could get a mortgage for the same area for.  So how does the math actually work in this situation.  Must not be any standard math I learned in school.

Posted by Tony Hager, Broker (United Realty Texas) almost 9 years ago
Tony- Your math would be correct if using today's prices. Keep in mind many people have higher mortgage payment due to prices of the boom. Homes in AZ are at average $1600 Mtg (based on previous prices) payments with market rent at about $800-900.
Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

Ted,

Rather than comment on whether this is a good idea or not, I'm just going to say that I believe this will be more successful than the loan modification programs rolled by the current and previous administration. There is more incentives for the owners of the loans to comply.

Doug

Posted by Doug Lazovick (Deed Street) almost 9 years ago

Paul-- Yes (in my opinion) the mark to market rules definitely led to this as well as the banks easily figuring out that the bailout money and their inventory are worth more if they hold onto it until the market seems ripe.  Although the MTM rules do have some temporary benefits.  They are all gambling that the market will subtlely inflate therefore offsetting some of their accounting wizardy.   It is smart business but still shady.  This goes on in many different industries too though so I am not surprised. In effect, they are offsetting the collapse of the US Banking system as you and I know it.  Of course people have a lot to say about this as so do I.  It is what it is at this point.  

Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

Paul-- Yes (in my opinion) the mark to market rules definitely led to this as well as the banks easily figuring out that the bailout money and their inventory are worth more if they hold onto it until the market seems ripe.  Although the MTM rules do have some temporary benefits.  They are all gambling that the market will subtlely inflate therefore offsetting some of their accounting wizardy.   It is smart business but still shady.  This goes on in many different industries too though so I am not surprised. In effect, they are offsetting the collapse of the US Banking system as you and I know it.  Of course people have a lot to say about this as so do I.  It is what it is at this point.  

Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

TEd -

Thanks for sharing this valuable information.  I'm not sure that FNMA should be in the property management business, but since it is a government sponsored agency, you know in advance that the landlord isn't likely to fix anything that breaks.

This is just a neat way for FNMA to have someone "pay" to maintain the home until they are ready to sell it at public auction or as a bank-owned property.

Posted by Martin Kalisker, Professional Standards & Legal Assistant (Greater Boston Association of REALTORS) almost 9 years ago

This is a band-aid approach, but I think it will help heal the small things.  The difficult part will be when the "renter" will have to take that bandaid off in 12 months.  All they are doing is buying themselves time to try and find a job, or turn their life around.

The main downside I see is that renters don't always take good care of the property, as if they were the owners.  I hope their property managers keep a very close watch or we could have homes in worse condition then if they had been foreclosed on out-right.

Posted by Jinx Cole almost 9 years ago

Just another sign that our industry has a long way to go before recovery. 

How much longer until everyone realizes over $100 (almost $200) Billion in commercial paper has defaulted this year?  Pretty soon you will be leasing commercial space from the feds too. 

The next shoe to fall is the commercial sector and it will hurt much more than the residential side.  Performing loans are being foreclosed on for no other reason than money in not available to refinance when they come due.  If you cannot afford the balloon payment or a significant principal reduction, you will be in default when your commercial loan matures.  There is $800 Billion in commercial paper set to mature by 2011. 

ARE YOU AWARE?  ARE YOUR CLIENTS AWARE?  WHAT IMPACT WILL THIS HAVE ON THE RESIDENTIAL SECTOR?  WHAT IMPACT WILL THIS HAVE ON OUR COUNTRY? 

Posted by Nathan Reeder, @PropertyMan219 (Reeder Companies LLC) almost 9 years ago

Ted,

The link for the borrower instructions is the same link for the FAQ. Can you send or post (or both) the link for the borrower instructions? Thanks

Posted by Matthew Coates almost 9 years ago

Here is the link for the instructions:

https://www.efanniemae.com/sf/servicing/d4l/pdf/d4lborrowerinstructions.pdf

 

Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

This actually makes a lot of sense if someone was looking at the bottom line. The banks do not have to pay for utilities or upkeep or at least it would be less costly than evicting the owner and carrying the costs of a vacant property. Also after one year I wonder if selling the property to a potential landlord or investor who may then evict the tenant and replace with a more preferred tenant or press the current tenant into a higher lease payment because of the previous owners emotional connection to the property. I can see this going in a lot of directions.

 

Great Lakes Insurance Group Agency

www.getgliga.com

Posted by Donald Stevens, Insurance for Landlords and Real Estate Closings (MyInsuranceNerd.com) almost 9 years ago

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