Housing – As predicted, Fannie director outlines Section 8 rental plans for foreclosed homes…in HOA communities…
Update: and plus, now Uncle Sam as the biggest renter/landlord in the US is artificially setting ‘free market’ fair market!? rental rates for the country, starting in the sand states, recall they are 90% of the mortgage market now the GSEs…so the investors buying houses here cheap to use as rentals now have to compete with Uncle Sam setting cheaper rates…another reason not to buy RRE just what the markets needed..not.
Update: So think about this. Let’s say you were vehemently opposed to your neighbor getting a principal reduction and staying in the house as an owner, maybe you thought that was ‘unfair’.
Okay, so now, your neighbor (or most likely your neighbor is gone now and it is a stranger), will move into that house next door and pay ‘market rental rates’, which are way lower than the perceived unfair break on mortgage payments right?
And then consider this person may in fact be a Section 8 low income housing aid recipient. Further consider this is in your gated community in which you pay exorbitant HOA fees.
Well your FAN rental neighbor will not be paying those fees, will not have the incentive of your previous OWNER neighbor to maintain property and will likely be exempt from those pesky HOA restrictions on property maintenance, after all FAN, Uncle Sam is the ‘owner’.
While Geithner and Donovan are telling Congress just THIS WEEK they have no plan for FAN FRED, FANNIE is announcing their move to become the biggest rental landlord in America, and they are going to bust gated communities in the process.
You think this is the better way to go? I think you’re nuts.
Original Post: Knew it. That woman who said Obama would pay her house and gas is laughing someplace now. In a gated community no less.
The director of Fannie Mae’s deed for lease (D4L) program outlined the initiative during Thursday’s Texas Mortgage Bankers Association (TMBA) servicing conference.
Miguel Gutierrez said the goal of Fannie Mae is to minimize family displacement for borrowers that participate in a deed-in-lieu of foreclosure program, launched early in November 2009, while managing it in a way so as to not put any undue pressure on Fannie’s ever-growing rental portfolio.
The homeowner-turned-renter is required to pay fair market rent to stay in their home for up to 12 months. The renter must have enough income to sustain a 31% income-to-rent ratio and rental payments are not subsidized by Fannie Mae, but could include renters eligible for Section 8 payments.
The example the FANNIE Director gave is an HOA community here in Phoenix:
As an example, Gutierrez outlined the situation for a fictional family that purchased a $275,000 home in Phoenix with a $247,500 mortgage and a down payment. Including homeowner association (HOA) fees, their monthly payment was $2,050. While those payments were manageable five years ago, the sample borrower had reduced income from his job and HOA fees had increased. Unable to pay their mortgage, the borrower joined the D4L program, reducing their rent to $1,000 while the family continues to look for additional income and/or alternative housing.
The upside of the program for Fannie Mae, Gutierrez said, is promoting neighborhood stabilization, mitigating real estate owned (REO) costs and provides the opportunity to consider other REO strategies, such as maintaining longer rental terms.
“With these benefits to Fannie Mae and borrower, we find the deed for lease program is an effective solution for these properties,” Gutierrez said.
There are some requirements for the new renters’ eligibility. Property managers inspect the home to ensure it is well maintained, generally an indication the renter will continue to keep the property in good repair during the lease term. The house must be eligible for lease; many times HOA rules don’t allow a home to be rental properties.
The program marks a significant shift in the strategy for the government-sponsored enterprise. Whereas Fannie Mae would previously dispose of properties in a traditional REO sale, now Fannie is becoming a landlord. Gutierrez said that’s a position Fannie is prepared to be in for the near future.
“We’re building a rental portfolio and the strategies are going to differ depending on the market. In some markets we’ll take a long view and want to hold onto the rental properties for some time,” he said. “In other markets, we may decide to reduce in our inventory. But in some cases, it’s possible some of these tenants will be able to stay in these homes for a few years.”…