In a new effort to help answer the foreclosure problem facing the nation, the Federal National Mortgage Association, or Fannie Mae, has announced a program that will allow troubled borrowers who don’t qualify for a loan modification to stay in their home as renters.  In order to do so, the homeowner must volunteer to relinquish ownership of the home through a deed in lieu of foreclosure.  This Deed for Lease program will be offered to qualified borrowers who were originally granted a loan modification but weren’t able to keep up with their payments.

The homes will be leased at market rates, and borrowers or tenants will qualify to stay only if they can document that rent does not exceed 31 percent of their gross income.“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,” saidFannie Mae Vice President Jay Ryan in a press release.

Like short sales, deeds in lieu of foreclosure allow troubled borrowers to avoid the foreclosure process,which can be expensive for lenders and damage homeowners’ credit ratings for years.

Many experts concur that this is a positive step for the real estate market, communities and home values.  Fannie Mae has seen a 57% increase in the number of homes they’ve foreclosed on in 2009 to date.  By preventing more foreclosures from inudating the market, it should help to keep values more stable and neighborhoods better cared for.  The question then becomes what happens if these renters stop paying rent.  And, is Fannie Mae really set up to not only be a mortgage propvider, but also a property manager?  I guess we will have to wait and see.