Two weeks ago, Fannie Mae announced a Deed for Lease Program, otherwise known as DL4 for homeowners who are facing foreclosure and do not qualify for a traditional loan modification or Obama’s Making Homes Affordable Plan, which was enacted in February 2009. DL4 is somewhat antithetical to what we know to be true about banks. Banks are not in the business of being landlords or property managers, but the deed for lease program would in fact make them defacto owners when a homeowner chooses to transfer title to their bank for a 12 month period or more to prevent foreclosure.
The program annoucement was so premature that many Realtors and homeowners are left with several pressing concerns:
1. From the homeowner’s perpective, homeowners generally want to know what happens after 12 months of renting their “old” home? Do they buy it back from the bank? What are the pros and cons for the homeowner? Why go though the title transfer process? What happens if I, the homeowner, misses a payment or two? Can the homeowner be evicted? What are the late fees?
2. Will banks hire property managers to oversee repairs and maintain the condition of property during lease? How are the “managers” going to be picked? Do they have property management experience? Do they have E&O coverage? Does the property management company have a trust account/accountability/experience, etc. Will Fannie sign a property management agreement with the management company? Will the bank list the house for sale to attact an investor?
One of the provisions of DL4 is that the bank has the right to market the home during lease term, which makes it possible that banks will hire REO real estate agents to help in the liquidation process of DL4 properties. Afterall, banks are not in the business of being landlords, or so we thought!
Too many questions and not enough answers.
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