Fannie Mae’s Deed for Lease Program Ventura County
December 6, 2009
Posted by Greg Guillen
Chris Thorman at http://www.softwareadvice.com/property-management/ wrote an intriguing article on Fannie Mae’s new Deed for Lease (D4L) program. The staff at Esquire Property Management Company in Ventura County, California is very interested in this topic because it impacts our landlords, tenants and our portfolio directly. Specifically, the city of Oxnard has been hit hard by foreclosures.
Thorman’s post explains D4L using illustrations and easy-to-digest nuggets of information. “Own to Rent: Breaking Down Fannie Mae’s Deed for Lease Program,” breaks down how the program works for home owners who are in financial trouble, who are eligible and their property requirements, respectively.
Chris posed the following question: “Do you think that the Deed for Lease program makes sense for Fannie Mae, the borrower or property managers administering the new leases?”
While reading this article I wondered why Fannie Mae would want to promote this program–it just doesn’t seem to be advantageous to them. Would it not be more cost effective for a bank to foreclose on a property versus executing a deed-in-lieu of foreclosure agreement (DIL)? Perhaps Fannie Mae economists are forecasting a significant upswing in the real estate market in the next couple of years, thereby providing them a tool to delay foreclosing on these homes while collecting rental income until the sales market strengthens. They would then be allowed to resell said properties for substantial yields compared to existing fair market prices.
Does the lease program make sense for property managers? At Esquire Property Management in Camarillo, CA, we believe it would be very lucrative. Much like the REO market, there would be a short term spike in property management accounts for a select few companies. In theory, it would be easy for the property manager to qualify the prior homeowner’s financial qualifications to rent back the home. The transition would be seamless as there would be no vacancy period. If the prior homeowner and home qualifies under the Fannie Mae guidelines, the property managent company’s overhead is minimized as no advertising or marketing costs are involved. On the other hand, a property manager could devote hours of effort qualifying the property and the owners/tenants , only to see their time and resources lost if the borrower or property does not qualify. Granted, such scenarios are common in the real estate industry.
More time, consideration and debate might be required on the issue of what might happen after the initial 12 month lease period is extinguished. Does anyone know how a property management company in California might sign up for the Fannie Mae Deed for Lease Program?
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2 Responses to “Fannie Mae’s Deed for Lease Program Ventura County”
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It certainly would be better than letting homes sit vacant. Banks seem to be slowly releasing property to artificially keep the prices higher, which delays the correction but theoretically will allow the banks to maximize their profits and minimize losses. Remember all the money we gave them to bail them out? So as the homes sit vacant, our neighborhoods look like Detroit and people have to sleep in their cars. Leasing sounds like a good option.
If the banks maximize their profits, perhaps they will be able to pay back the bail-out money? As for now, I hear this program is taking a while to get rolling–hopefully it’s not a publicity stunt to make Fannie Mae look like they are trying to help the borrower.