Fannie Mae to rent out homes instead of foreclosing

AP reports on a new Fannie Mae program to allow homeowners who can’t pay their mortgages to rent instead:

Thousands of borrowers on the verge of foreclosure will soon have the option of renting their homes from Fannie Mae, under a policy announced Thursday.

The government-controlled company, through its new “Deed for Lease” program, will allow borrowers to transfer ownership to Fannie Mae and sign a one-year lease, with month-to-month extensions after that.

The program will “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,” Jay Ryan, a Fannie Mae vice president, said in a statement.

But the effort is likely to affect a relatively small number of homeowners. In the first half of the year, Fannie Mae took back about 1,200 properties through this process, known as a deed-in-lieu of foreclosure. That pales in comparison to the 57,000 foreclosed properties the company repossessed in the period. . . .

The rental program is designed to help homeowners who don’t qualify for a loan modification under the Obama administration’s plan, but still want to remain in their homes. . . .

Fannie Mae has hired an outside company, which officials declined to identify, to manage the properties.

In the Depression, when the government took over late or delinquent mortgages, many people just stopped paying because they knew that the federal government usually didn’t have the stomach to foreclose.

With its new rental program and Fannie Mae’s superb record of planning and management, what could possibly go wrong?

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