Written by Craig D. Robins, Esq.
If you have a Fannie Mae mortgage, are delinquent with your mortgage payments, and are headed towards losing your house in foreclosure, you may be able to get a temporary break. A new program entitled, “Deed for Lease” permits homeowners to transfer the deed to their house to Fannie Mae and sign a one-year lease. The program was just announced two days ago.
Why would Fannie Mae do this? The foreclosure process is usually lengthy and time-consuming. This program will permit families to stay in their homes (albeit for a limited period of time) and avoid the uncertainty of foreclosure.
However, the program is not for everyone. There is a detailed application process and you must be approved. Also, the program only applies to Fannie Mae mortgages.
Is the “Deed for Lease” program better than filing bankruptcy or engaging in foreclosure defense? Only an experienced bankruptcy attorney can really help answer that question. There are pros and cons with all options. The “Deed for Lease” program means losing your home — for good. On the other hand, filing a Chapter 13 bankruptcy enables the homeowner to cure the mortgage arrears over time and keep the home.
The program also guarantees a minimum one-year rental period, which also calls for a monthly rental payment. However, defending a foreclosure proceeding (assuming that there is a reasonable foreclosure defense) can often provide the homeowner with an even longer period to stay in the home, during which time the homeowner does not make any rent, mortgage or real estate tax payments. In the program, you would have to pay “market rate” for rent, which could be fairly pricey. For a typical Long Island home, that could easily be $2,000 per month or more.
Finally, even if the program sounds good for you, there is no guarantee that you will be accepted into it, and the approval process can take some time — and all the while the mortgagee can continue a foreclosure proceeding.
Of course, if the bank takes back a deed in exchange for a lease, the homeowner is off the hook for any mortgage deficiency. However, keep in mind that a Chapter 7 bankruptcy filing in New York would discharge such a deficiency.
If you’ve already filed for bankruptcy, you are not eligible for the program.
How do I know if I have a Fannie Mae mortgage? Fannie Mae has a website that enables you to look up your property to see: http://loanlookup.fanniemae.com/loanlookup/ .
What are the details of the “Deed for Lease” program?