Unemployment rates are rising across the nation and homeowners are having their monthly mortgage payments rise due to decisions made such as interest only home loans and adjustable rate mortgages. Because of factors such as these, a large number of homeowners are receiving foreclosure filings every month. According to RealtyTrac, around 300,000 homeowners receive foreclosure filings in the United States every month.
Foreclosures are a huge problem and they’re dragging the already beaten real estate market down further. For some, there may be good news – the government controlled lending company Fannie Mae has a new program called the “Deed for Lease” program. The program was designed to aid borrowers who are in imminent danger of foreclosure and represents another government bailout that we can’t afford.
Through the program, borrowers who qualify will be able to transfer the ownership of their property to Fannie Mae; then, the borrower signs a one-year lease on the property with potential extensions every month after the lease expires (it could go on for years). The rent is determined by the market and could end up being a huge relief for the homeowner.
While this program seems like an excellent idea that could help borrowers stay in their home, the program will likely not live up to its expectation – let’s face it, the government has an implementation problem. Like many other failed government programs, this program will probably only help a small number of homeowners avoid foreclosure. In fact, during the first half of 2009, Fannie Mae only acquired 1,200 properties through the “Deed for Lease” program. In comparison, they foreclosed on 57,000 properties during the same period.
This program is mainly there to aid borrowers that do not qualify for a loan modification under the Making Home Affordable plan, but still want to be able to stay in their home. To qualify for the “Deed for Lease” program, homeowners must live in the home as their primary resident and be able to prove that they can afford the payments on the lease. The rent on the property cannot exceed more than 31% of their pretax income; enrollment in the program does less damage to your credit than a foreclosure.
Sources:
New Option: Rent and stay in home
Deed-for-Lease Program
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Maybe if the people who run the banks did it a bit morre resonsibly we all would not be in this mess!
And they still get a bonus! What other job would you be rewarded for messing up?!
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Most people are losing their homes because they are losing their jobs. Not from higher interest etc. I don’t ever see this program being effective at all for that reason alone.
We don’t need more Government program. U.S. NEEDS JOBS. Stop or put high extra taxes on companies who produce half or more of theirs product in low price countries and then call it made in U.S. like the U.S. car industries do, and who produces many car parts in Canada. Also do something about the astronomical import from China and other low price countries.
I was quite interested in this article. The company I founded was built specifically because we believe that those who did NOT contribute to the crisis we are currently in should be rewarded. There are many who have maintained solid credit through this crisis, and who still will …
… These people are my clients. We seek to serve, exclusively, those with 700+ credit scores. Our objective is to help them find programs that reward them for their fiscal wisdom.
You said, “Unemployment rates are rising across the nation and homeowners are having their monthly mortgage payments rise due to decisions made such as interest only home loans and adjustable rate mortgages.” We have not yet seen all of the problems that have been created as a result of this kind of behavior.
Should not those who did not contribute to this crisis be rewarded? We think so.
Great blog entry. The mortgage industry and the real estate industry move hand-in-hand. We hope to work with you to encourage responsible home buying and mortgage lending.
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