WASHINGTON — Can’t pay the mortgage? You still might be able to stay in your home. Government-controlled mortgage company Fannie Mae is going to give borrowers on the verge of foreclosure the option of renting their homes for a year.
The change, announced Thursday, could give a temporary break to thousands of homeowners, but critics question whether it will only add to the mushrooming losses at the company.
The new Deed for Lease program will let homeowners transfer title to Fannie Mae and sign a one-year lease, with potential month-to-month extensions after that. It also helps save money because the lender does not need to complete the often lengthy and time-consuming foreclosure process.
The program helps “eliminate some of the uncertainty of foreclosure, keeps families in their homes during a transitional period and helps to stabilize neighborhoods and communities,” said Jay Ryan, a Fannie Mae vice president.
It also does less harm to the borrower’s credit record.
“It shows that you put your best effort to work out a solution,” said Gabe del Rio of Community HousingWorks of San Diego.
However, Mike Himes, director of homeownership services at NeighborWorks Sacramento, said the industry should push harder to modify loans at lower monthly payments.
“The preferred option is allowing people to retain ownership,” he said.
While Fannie Mae executives say the company’s motives are community-minded, critics say the company is simply gambling that the properties will eventually sell for a higher price.
That’s folly, says Peter Schiff, president of Euro Pacific Capital in Darien, Conn. “Taxpayers are now going to own all these houses that (Fannie Mae) should have unloaded,” he said. “It’s going to cost a fortune.”
The announcement came as Fannie Mae asked for an additional $15 billion in government aid after posting another big loss in the third quarter.
