Fannie Mae starts renting homes to owners in foreclosure

Yeah, this will work out just fine. Other than the fact Fannie Mae has no experience renting homes and the owners-turned-tenants will not be able to afford the market rate for the rent. I’m quite certain this is the best thing to do. Not.

In a Nov. 5 news release, Fannie Mae announced their new Deed for Lease program where qualifying homeowners who are in foreclosure can sign a lease and stay in the house they would not be able to afford to buy or rent anyway.

Yes, I know, people run into hard times especially in the current economy but do you know what? When I could not afford the rent I was paying after I moved out of the house, I noticed the problem in advance and moved back home for awhile to get the finances straightened out.

From the government sponsored Fannie Mae…

According to Trust Deed Scotland experts, the new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under Deed for Lease, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.

Market rate? Are they kidding?

As Timothy Birdnow notes over at Amerian Thinker, the rental rate is generally more expensive than a mortgage since the landlord still must pay the taxes, maintain the property and hopefully make a few dollars in profit to cover his time and effort to manage the property itself.

What if the homeowner in default can not afford the market rate which in most cases is higher than the base cost of the mortgage?

The premise here is that rent will be cheaper than the mortgage, and that is not necessarily so. In point of fact, for the homeowner to convert to a tenant the rent will have to be lowered, and likely by a large amount. Already the bank is losing money on their “investment”, an investment they did not want but were required to make.

Of course, the new tenants are not likely to be particularly careful with the property that they used to own; many will be angry that they made mortgage payments to the bank only to surrender their property anyway. Since many of these tenants were sub-prime mortgage holders, one can fairly make the case that there will be higher incidents of damage, which the newly minted landlord will be required to repair. Overdue rent will have to be collected, and it seems likely that many of the tenants will find it just as difficult to pay their rent as it was to pay their mortgages. Evictions take time (and in places like California are notoriously difficult to obtain) and many of these investments will end-up as vacant buildings stripped of copper pipes, furnace, appliances, and with windows broken out.

There are so many problems with this program and it really comes down to the fact taxpayers once again are going to be footing the bill for this nonsense.

But the owners-now-tenants will have nothing to fear when the hot water goes on the fritz at 5 a.m. on Thanksgiving morning, for President Obama will be there to take care of you. I heard he’s got connections with the local plumbers and pipe fitters union.