On front porches and in bars, beauty shops, and office coffee rooms around America, people have come up with an unique solution to part of the housing problem: Let the people whose homes are foreclosed on pay rent to continue to live there. This approach could keep the homes occupied, which would maintain neighborhood stability and housing resale value. Banks would receive revenue instead of just another under-funded asset to put in inventory–one that might be severely damaged by the time they got ready to sell it.
Now! Common wisdom in a government program
On November 5, the FHA announced the Deed for Lease (D4L) program, which would allow qualifying owners on the brink of foreclosure to lease the property for a year or more after turning in the deed. The program might even be available to tenants. To qualify, the homeowner must be unable to have his loan modified and must be able to pay market value rent of no more than 31% of the household income. Further, he must keep the property in good condition, have rental insurance if he has pets, and must live in the home as a primary residence.
A benefit for troubled homeowners
For many, it will reduce their payments to 31% of their income. If they had other mortgages on the property, they would be released from those. The tradeoff is that they are no longer homeowners, but that financial position will disappear with less damage to the person’s credit report and less family and neighborhood disruption. Although the program may offer only temporary relief–the lease is initially for one year–that time allows the former homeowner to get his finances back in order and perhaps plan for the future without the stress of foreclosure looming. (Read more facts about Deed for Lease here.)
For the lender, D4L eliminates many of the costs of foreclosure, provides rental income, and preserves the property’s condition. Banks may not want to be landlords any more than they want foreclosed properties, but D4L is a reasonable solution that will pay off for them if housing prices rebound and lenders are able to sell the homes for more than the original price.
Facing possible foreclosure?
Is Deed for Lease a good idea for you? If you want to stay in your home and can afford the new payment, D4L might be ideal. However if you are unemployed or are living in a home too expensive for you, you will probably fail the income test.
Express Homebuyers offers another solution that might work even better for you. We buy houses for cash, clear the liens, and wrap up the transaction within a couple weeks. We will even provide you with a cash advance to help you get settled in a new place.
Our motto is We Sell Your Home Fast. You can put this motto into action today by contacting Express Homebuyers at 1-(877) 804-5252. Want more information on the process before you make the call? Read this list of frequently asked questions to prepare you to make the decision that gives you a fresh start.