Fannie Mae Implementing the Deed for Lease Program

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Submitted by Huckleberry on November 5, 2009 - 2:07pm

http://www.fanniemae.com/newsreleases/20...

So, this will pull rents DOWN as a flood of new rentals hits the market. This program lowers rents to 31% of income, so instantly rents will fall to match incomes, and in doing so drag other rentals down with them. This is a HUGE WIN for renters, and a DISASTER for landlords.

But, given you can squat in a foreclosure for free for several years, why bother paying rent? Property taxes will not be paid, nor will upkeep. For condos, in particular, this seems like it will get messy, what about HOA fees? Is Fannie going to pay them?

As we all know, when rents come down, so do the prices of homes. If I can rent a nice place cheaper than I can own it, you bet I'm gonna rent!

Think about how this plays out...The only thing I'm sure of here is there will be a lot of unforeseen consequences.

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This approach will reduce
Submitted by Sandiagon on November 5, 2009 - 2:28pm.

This approach will reduce inventory of available homes for sale on the market. I do not think this has any effect on existing rental market. Unemployment is the major reason to drive down rents in near future (next couple of years).

all the people in the homes
Submitted by scaredycat on November 5, 2009 - 2:50pm.

all the people in the homes are renters who aren't renting rentals. so it seems like it has to increase the number of rentals avilable on the market, assuming the people staying in the homes would otherwise have rented rentals and not just lived in their vans or crashed at friends' houses.

Huckleberry
Submitted by analyst on November 5, 2009 - 3:00pm.

Huckleberry wrote:
http://www.fanniemae.com/newsreleases/2009/4844.jhtml?p=Media&s=News+Releases

This program lowers rents to 31% of income, so instantly rents will fall to match incomes, and in doing so drag other rentals down with them.

The news release does not say that rents will be lowered to 31% of income. It says that, to qualify, the borrower-become-renter may not pay more than 31% of income to cover the newly established market rental rate.

The unanswered question is how market rental rate will be established for each property.

scaredycat wrote:all the
Submitted by FormerSanDiegan on November 5, 2009 - 3:41pm.

scaredycat wrote:
all the people in the homes are renters who aren't renting rentals. so it seems like it has to increase the number of rentals avilable on the market, assuming the people staying in the homes would otherwise have rented rentals and not just lived in their vans or crashed at friends' houses.

I believe that it would result in very nearly ZERO net change in supply and demand of rentals. Here's why.

Demand side:
If they were foreclosed on, the former owner would be in the market for a new unit. Net result to demand: one new renter.

Supply side :
Once the house is foreclosed and sold it will either be owner occupied or rented out. I'll address three cases (sold to investor for rental; sold to one who was previously in a rental; sold to move-up buyer)
1. In the case where it is rented out there is an increase of one additional rental unit. Net result to supply: one new rental unit.
2. If it is sold to someone who was previously renting, their previous rental is available. Net result to supply: one new rental unit.
3. If it sold to a move-up buyer, then they have to either sell or rent out their house. If they rent it out the net reult is one additional rental unit. If they sell then either their buyer or their buyer's buyer (or someone further down the chain of move up buyers) is a previous renter. Net result : one additional rental unit.

ok im persuaded. no
Submitted by scaredycat on November 5, 2009 - 4:14pm.

ok im persuaded. no additional rental units. it's almost like a form of rent-controlled housing. what if the 31% never adjusts, and there is massive inflation? Then it would truly be an awesome renting deal! will it have an effect on houisng prices? lowers supply, so higher prices? or does it just slow the bleeding?

No one mentioned the
Submitted by waiting hawk on November 5, 2009 - 8:03pm.

No one mentioned the maintenance? Under certain laws the guberment cannot be a slum lord so go ahead and let your property go back to them and call them to fix your dishwasher, ac, and leaky roof. lmao this is a sweet deal for home debtors if you ask me.