Own-to-Rent by Some Other Name

It took two years, but Dean Baker’s own to rent idea for how to mitigate the disruptive impact of widespread foreclosures is gaining some traction.  From the Wall Street Journal:

Fannie Mae will allow homeowners facing foreclosure to stay in their homes and rent them for as long as a year, as part of the government’s latest effort to help troubled borrowers, while keeping more foreclosed properties from hitting the housing market.

The “Deed for Lease” Program lets borrowers who don’t qualify for loan modifications transfer their property to Fannie Mae in exchange for a lease. Borrowers-turned-tenants will pay market rents, which in most cases are lower than the cost of mortgage payments, and might be offered extensions when their leases expire.

Fannie Mae wouldn’t say in its Thursday announcement how many homeowners it expects would take advantage of the program. The company acquired 57,000 properties through foreclosure during the first half of the year.

The article notes that Freddie Mac (FRE) began offering month-to-month leases to some foreclosed homeowners in February and may step up to a program similar to Fannie Mae’s.  Question: did it take this long for the idea to catch on, or did it take this long for the housing market to change to a point where Fannie Mae (FNM) thought this would now be a good idea?

Photo: futureatlas.com

About Andrew Samwick 89 Articles

Affiliation: Dartmouth College

Andrew Samwick is a professor of economics and Director of the Nelson A. Rockefeller Center at Dartmouth College in Hanover, New Hampshire.

He is most widely known for his work on the economics of retirement, and his scholarly work has covered a range of topics, including pensions, saving, taxation, portfolio choice, and executive compensation.

In July 2003, Samwick joined the staff of the President's Council of Economic Advisers, serving for a year as its chief economist and helping to direct the work of about 20 economists in support of the three Presidential appointees on the Council.

Visit: Andrew Samwick's Page

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