Fannie Mae (NYSE: FNM) has initiated a new Deed to Lease program in which homeowners facing foreclosure will be able to stay in their homes as renters.
During the first half of the year, Fannie Mae has acquired 57,000 homes through foreclosure. These are owners who do not qualify for mortgage restructuring. They must demonstrate that they could not pay their mortgage but can pay rent. The rents paid are lower than their previous mortgage payment.
Fannie's foreclosed homes under the Deed to Lease program are not listed for sale. Tenants are given month-to-month leases.
The vice president of equity investments at Fannie said: "If you keep people in their homes, it's better for the community. It's better for the financial institutions that own those homes." Another obvious benefit is that renting these homes provides cash flow for Fannie Mae.
It is hoped that property values will be higher next year as the economy recovers. If that happens, Fannie will be able to recoup some of its losses on these foreclosed properties.
Do you believe that this Deed to Lease program is a good idea?
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