Fannie Mae Deed-for Lease Program Announced

By admin • November 12th, 2009

Today Fannie Mae released Servicing Guide Announcement 09-33: Introduction of the Deed-for-Lease™ Program (D4L). D4L allows qualifying borrowers facing foreclosure (or their tenants) to remain in their home by signing a lease in connection with the voluntary transfer of the property to the lender through a deed-in-lieu of foreclosure (DIL) transaction. The D4L program is for borrowers who do not qualify for or have not been able to sustain other loan workout solutions, such as a modification. Servicers can begin offering D4L immediately.

D4L is designed to minimize family displacement, deterioration of neighborhoods caused by vandalism and theft to vacant homes, and the effect these have on families, communities and home price stabilization.

To participate in D4L, a borrower must live in the home as his or her primary residence or lease the home to a tenant who uses it as a primary residence. Once approved for the program, borrowers or their tenants lease back the home at a market rate, and must be able to document that the new market rental rate is no more than 31% of their gross income. See Announcement 09-33 for complete eligibility requirements.

With the D4L program, servicers are expected to follow the established process in considering a borrower for a DIL according to Fannie Mae’s workout hierarchy. Once a servicer determines a borrower is eligible for a DIL, the servicer will notify Fannie Mae that the borrower may also qualify for a D4L based on a pre-screen for borrower eligibility. The lease back option is dependent on successful completion of the DIL.

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