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http://www.huffingtonpost.com/2009/11/0 … 46988.html

WASHINGTON — Can't pay the mortgage? You still might be able to stay in your home. Government-controlled mortgage company Fannie Mae is going to give borrowers on the verge of foreclosure the option of renting their homes for a year.

The change announced Thursday could give a temporary break to thousands of homeowners, but critics question whether it will only add to the mushrooming losses at the company, which has received billions in taxpayer money.

The new "Deed for Lease" program will allow homeowners to transfer title to Fannie Mae and sign a one-year lease, with potential month-to-month extensions after that. It also helps save money because the lender does not need to complete the often lengthy and time-consuming foreclosure process.

The 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," Jay Ryan, a Fannie Mae vice president, said in a statement.

It also does less harm to the borrower's credit record.

"It shows that you put your best effort to work out a solution," said Gabe del Rio, director of homeownership at Community HousingWorks of San Diego.

This sounds like a great idea, until you think about it for a while. Like, oh, if they can't afford the mortgage, what makes anyone think they will be able to afford the rent? A lot of people who are behind on payments have lost their job - and thus not eligible for loan modifications. Wouldn't they also be unlikely to afford the rent as well? If they can afford the rent, why not modify the loan to make the rent the loan payment?

This is going to turn Uncle Sam, and by extension, us, into landlords. Will we be forced to fix everything in these houses once it's a rental? Has anyone thought through the implications of insurance on the properties, legal liabilities, etc. Jeez folks, either modify the loans or foreclose - but don't do this.

It won't do squat for people who lost their jobs; they are just toast. It won't do squat for people who didn't lose their jobs, but can no longer afford the new interest rate; they can get a loan modification. Ultimately, the only people who will do this are the people who can afford their payments, but are underwater and want out - without having to move immediately. It sounds like it might be a bit more convenient than a short sale, since it allows for up to a year to find a new home.

This is actually worse than the other program, deed-in-lieu, where homeowners who are deeply underwater on their mortgage just walk away with zero repercussions. They just sign over the deed, hand it (and the keys) to the lender, and leave. At least that results in a salable house.