Ruth Lee
Foreclosure is a nasty business. From both an economic and public relations perspective, there is nothing positive about removing borrowers from their homes. As homes lie fallow, their risk of further degeneration in their value is hugely increased from a lack of maintenance or vandalism. As an interim solution, FNMA is offering a work out solution for a subset of homeowners that will allow them to stay in their homes as renters, see the article below. The reality is that, for the lender, these homes become dead properties in a market flush with foreclosures, requiring maintenance and offering zero income. For the homeowner, they are faced with the certainty and expense of a move either way…or becoming essentially homeless. Either of these propositions is an almost certain lose-lose for both FNMA and the homeowner.
This new program offers a “win-win” for both FNMA and the borrower, such that the property isn’t vacant, remains income producing and the borrower gets to stay in the home as a renter – using fair market rental rates. While everyone likes the stories of people getting these great deals where the lenders modify a homeowner’s loan by tens of thousands or offer some below market rate… those are just not commonplace or often even sound business practice. At the end of the day, those loans are insured by us all, the American taxpayer… and FNMA is offering an opportunity to protect our investment. As an income producing property, FNMA knows they won’t have to deal with expensive evictions, costly maintenance on vacant properties or accepting “fire sale” prices for a good asset – just to get it off the books. For the borrower, there is peace of mind that despite their tragic reversal of financial fortunes, they get to stay in their home while they figure out their next move.
