Freddie Mac and Fannie Mae said they would offer leases to homeowners who will lose their homes under a foreclosure. This will in effect allow the family to continue living in the residence while they explore longer term solutions. It will help eliminate the possibility of homelessness as well. Existing tenants of the mortgage borrowers / homeowners will also be offered leases.
This additional mortgage and foreclosure leaseback assistance program is a new feature of a plan being implemented this month by Fannie Mae and Freddie Mac. This is according to statements from the two government-controlled companies. Currently, both companies have also extended their suspensions of evictions of renters or borrowers due to foreclosure through Feb. 28.
By allowing homeowners to stay in their homes and by extending leases to those borrowers (in addition to tenants), Freddie Mac’s REO Rental Initiative plan should go further toward easing the impact of foreclosures on homeowners and also the community, where a rising numbers of empty homes is depressing home prices further. When house prices fall, foreclosures tend to follow as stressed borrowers find themselves owing more than the house is worth, unable to obtain additional financing, and then going into foreclosure.
David Moffett, Freddie Mac's chief executive officer has said that keeping foreclosed homes and properties occupied and in better repair will help local property values stay high and promote a faster recovery in the housing market. It will also help reduce the possibility of homelessness in communities across the nation.
There are several conditions and prerequisites to the program. First and foremost is the home needs to be in good condition and it will need to meet all local building code requirements and state laws. It is a temporary program intended to provide short term relief to families that have been impacted by a foreclosure.
In order to enter into a lease with Freddie Mac, the applicant will need to prove that they can afford to pay rent on a monthly basis and this monthly amount will be set at market rates. They will need to enter into a formal lease agreement and also agree to have the home inspected.
The home will more than likely be marketed for sale while the individual continues to live in the home, so they will need to agree to allow real estate agents to show the property to prospective buyers and real estate agents while they live there.
If the leaseback agreement does not work, then Freddie Mac will try to offer all occupants the option of accepting relocation assistance. Fannie Mae may offer this as well if the homeowner prefers to vacate the property. These agreements are usually called “cash for keys, and the homeowner will often receive a cash payment if they vacate the home by the date specified. In order to receive the compensation they will need to ensure the home is well maintained in so called broom-cleaned condition. It needs to be free of debris, damage, and personal belongings.
In addition, Freddie Mac said that it will still seek loan modifications to allow borrowers to retain ownership. Eligible renters will be offered month-to-month leases to stay in the home. To learn more on this leaseback or rental agreement from Freddie Mac, dial 888-995-4673.
The Fannie Mae Deed-for-Lease Program is very similar to the program mentioned above. It will offer a 12 month lease to homeowners, and the monthly rent should be set at market rates. Other forms of compensation may be offered as well to current homeowners or the tenants. Call 1-800-732-6643 to get more information.
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