Archive for April, 2011

I’m often asked about whether a Lender would rent back to a debtor after a foreclosure. Generally the answer is no since there may be a new buyer at the foreclosure or, if the lender gets the property back as an REO, they typically want to re-sell it as soon as possible. But this may be possible with a Deed in Lieu of Foreclosure (“DIL”), particularly if the loan is owned by FannieMae (FNMA). 

Unlike a foreclosure which is a forced transfer, a DIL is a voluntary transfer of the title to the property from the lender.  This saves the lender time and money. And it can allow space and communication for negotiations.  If a loan modification or a short sale is not possible, the DIL allows the debtor to get rid of the property while avoiding the deficiency judgment risk and credit damage of a foreclosure.  Here’s how it works:

In late 2009, FNMA started what it calls a “Deed for Lease Program” which combines a DIL with a Lease-back to the occupant for up to 12 months.  The program is targeted for qualifying homeowners who are facing foreclosure but do not qualify for a loan modification.  As stated by FNMA:  “This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.”   

The basic qualifying requirements are :

1.  It must be a first loan on a 1-4 unit property. The loan cannot be government guaranteed (FHA, VA, HUD, Rural Dev.); Any junior liens must subordinate;

2.  It must be the borrower’s primary residence or their tenant’s primary residence;

3.  The occupant must meet income and payment guidelines (similar to HAMP) and cannot be in bankruptcy or litigation involving the property or the loan.

If the occupant meets the qualifications, FNMA will Lease the property back to the occupant for up to 12 months after completion of the DIL at a market rent not to exceed 31% of the occupant’s monthly gross income.  What is very significant here is that the Lease-back can apply to tenants in the borrower’s rental property.  While we’ve not seen any other lenders offer a similar Deed for Lease program, a request for lease-back could be part of any DIL negotiations.

To learn more about the FNMA Deed for Lease Program, click on these links:

http://www.fanniemae.com/newsreleases/2009/4844.jhtml

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0933.pdf

https://www.efanniemae.com/sf/servicing/d4l/pdf/d4lfaqs.pdf

If you have specific questions about your upside down loans or real estate, feel free to contact us at sjbeede@bpelaw.com.  We offer a $200 flat fee attorney consultation to review your situation and help you evaluate and choose the best opportunities. This can be done in person or by phone. If interested, please call us at 916-966-2260.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are upside-down on your loan(s), especially if you’re facing a lender lawsuit, get competent legal advice in your State immediately so that you can determine your best options.

For the past three years, I’ve been regularly advising upside-down property owners on the challenges, risks, and strategies of dealing with their lenders and upside down loans.  Over 2,000 borrowers and their Realtors have consulted with us to determine what they should do.  As our nation’s economy slowly recovers, some solutions have improved such as lender’s willingness to do short sales while others have gotten worse such as the failure of loan modification programs.  And we’re now defending more and more clients from lender and collection company lawsuits seeking deficiency judgments.

At the request of several clients, we’re providing the following informational links to Outlines that can help owners and Realtors know which questions to ask and learn which way to proceed.

Guide for Upside-Down Property Owners

Outline for Property Owners Seminar

Outline for Realtors Seminar

If you have specific questions about your upside down loans or real estate, feel free to contact us at sjbeede@bpelaw.com.  We offer a $200 flat fee attorney consultation to review your situation and help you evaluate and choose the best opportunities. This can be done in person or by phone. If interested, please call us at 916-966-2260.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are upside-down on your loan(s), especially if you’re facing a lender lawsuit, get competent legal advice in your State immediately so that you can determine your best options.