Fannie Mae Deed for Lease
This morning, Fannie Mae announced an innovative program to help keep families from falling into foreclosure. The program, called Deed For Lease (D4L) allows struggling homeowners who are unable to qualify for a loan modification to essentially hand their keys over to Fannie Mae, and then rent back their house at current market rental rates.
The mortgage loan is a first lien mortgage loan secured by a one- to four-unit property. All property types are eligible. Second lien mortgage loans are not eligible.
The mortgage loan is not guaranteed or insured by a federal agency (FHA, HUD, VA, or Rural Development).
The borrower resides in the property as a primary residence or has leased the property to a tenant who uses the property as a primary residence. Second homes or vacation homes are not eligible.
At least three payments have been made since origination or since the last modification.
At the time of the referral to Fannie Mae for the D4L, the borrower is not 12 or more payments past due on the mortgage loan.
The borrower is not involved in an active bankruptcy proceeding and is not a party to litigation involving the subject property or the mortgage loan.
Marketable title is able to be conveyed (a title insurance policy is required).
If there are subordinate liens secured against the subject, lien releases can be obtained.
The occupant of the property (i.e., the borrower or the borrower’s tenant) has verifiable income. Occupants with no source of income are not eligible.
Fannie Mae Deed for Lease: Additional Eligibility Criteria to be Determined by Fannie Mae
Fannie Mae, or its designee, will take the necessary steps to further verify property and borrower eligibility as follows.
Fannie Mae Deed For Lease Property Eligibility
- There are no zoning or homeowner’s association (HOA) rental limitations that would prohibit a D4L.
- Repairs required to make the property habitable are deemed to be in an acceptable amount based on the property value.
- The property is in compliance with local rules and laws or can be brought into compliance within 30 days.
- The property is not within a target area for any corporate, government or community neighborhood stabilization plan which may need the property as part of the plan for purposes other than residential.
- The rental income from the property is anticipated to cover ongoing maintenance and management costs.
Fannie Mae Deed For Lease Occupant Eligibility
- The occupant’s income is sufficient to cover rental payments of not more than 31 percent of gross income. If the rental payment is greater than 31 percent of the occupant’s monthly gross income, a lease will not be offered.
- Inspection of the property indicates that the occupants have been keeping the property in good condition.
- The occupant agrees to be responsible for regular maintenance, to keep the property in good condition, and to permit marketing of the property for sale.
- The number of occupants is appropriate for the home and in compliance with local laws and homeowner association rules.
- If pets are present, renter’s insurance is obtained if required.
- The occupants signing the lease must agree to a credit review and all occupants over the age of 18 must have an acceptable background check including receiving clearance from the Office of Foreign Assets Control (“OFAC”).
- There are no signs or reports of illegal activities conducted at the property.
- The property is to be used as a primary residence.