Own-to-Rent by Some Other Name
It took two years, but Dean Baker's own to rent idea for how to mitigate the disruptive impact of widespread foreclosures is gaining some traction. From the Wall Street Journal:
Fannie Mae will allow homeowners facing foreclosure to stay in their homes and rent them for as long as a year, as part of the government's latest effort to help troubled borrowers, while keeping more foreclosed properties from hitting the housing market.
The "Deed for Lease" Program lets borrowers who don't qualify for loan modifications transfer their property to Fannie Mae in exchange for a lease. Borrowers-turned-tenants will pay market rents, which in most cases are lower than the cost of mortgage payments, and might be offered extensions when their leases expire.
Fannie Mae wouldn't say in its Thursday announcement how many homeowners it expects would take advantage of the program. The company acquired 57,000 properties through foreclosure during the first half of the year.
The article notes that Freddie Mac began offering month-to-month leases to some foreclosed homeowners in February and may step up to a program similar to Fannie Mae's. Question: did it take this long for the idea to catch on, or did it take this long for the housing market to change to a point where Fannie Mae thought this would now be a good idea?
Freddie Mac adopted a version of right to rent in March
See http://www.freddiemac.com/news/archives/servicing/2009/20090305_reo-rent...
Freddie Mac Officially Launches REO Rental Initiative for Tenants, Owner-Occupants After Foreclosure
March 05, 2009
Contact: corprel@freddiemac.com
or (703) 903-3933
McLean, VA – Freddie Mac (NYSE: FRE) today announced the official launch of its new REO Rental Initiative giving qualified tenants and former owners the option to lease their recently foreclosed properties on a month-to-month basis. The REO Rental Initiative will be managed by HomeSteps®, Freddie Mac's national real estate unit, and implemented through several national property management firms.
Freddie Mac also announced it will continue to suspend all eviction actions until April 1, 2009 to ensure there is ample time for current occupants to learn about the options available to them under the new initiative.
"Freddie Mac's REO Rental Initiative can help ease a foreclosure's impact by giving renters and former owners more time to determine what options are best for them and their families. At the same time, the REO Rental Initiative helps stabilize property values and local communities by keeping homes occupied and less vulnerable to vandalism," said Ingrid Beckles, Senior Vice President, Default Asset Management at Freddie Mac.
Starting today the property management firms will begin the process of contacting occupants of foreclosed properties to determine their interest in staying in the home and their eligibility for a month-to-month lease. Occupants will be contacted only after the foreclosure gives Freddie Mac the legal authority to offer a lease.
To qualify for a lease, the tenant or former owner must occupy the property and show they have adequate income to pay the monthly rental amount established by the property management company based on market rents for the area in which the home is located. Occupants must agree to allow HomeSteps to show the home to potential buyers as it will be marketed for sale during the lease period.
Additionally the home must be in safe, habitable condition and meet all local codes for rental properties to qualify for the REO Rental Initiative.
If an occupant does not wish to lease the property, Freddie Mac will continue its current practice of offering relocation assistance. In addition, Freddie Mac will also explore available workout options with owner-occupants after Freddie Mac gains title to the property through foreclosure.