How to Rent-Back a House, Instead of Foreclosing and Moving Out

For homeowners facing possible foreclosure, it is sometimes possible to stay in the home, and reduce monthly costs, by deeding the house to the bank, and renting it back from them. This rent-back option, known as the Deed-for-Lease (D4L) Program, has been growing in popularity. Here's how to find out if it's right for you.

Difficulty: Moderately Challenging

Instructions

1. **Learn about DIL and D4L**
   
   DIL is the banking industry shorthand for Deed-in-Lieu of foreclosure, which essentially means you turn over ownership of your home to the bank, and your debt is wiped out, even if the home's value is less than the amount you owe.
   
   Deed in lieu of foreclosure can be problematic, as the former homeowner is forced to abandon the house, which may then become a vacant property contributing to overall declines in property values in an entire neighborhood.
   
   The D4L Program -- Deed for Lease -- is designed to be a win-win-win for the homeowner, bank, and for the neighborhood in general. With D4L, the bank becomes a landlord, and rents the house the ex-owner.
   
   The monthly rent is set at the market rate, and is typically a good deal lower than the amount of the monthly mortgage that was being paid. Hopefully, the rent is low enough that the former homeowner can now afford to stay in the house as a tenant.

2. **Check With Fannie Mae**
   
   D4L is a program launched by mortgage giant, Fannie Mae, and is applicable to loans held by Fannie Mae. To find out if your own loan is a Fannie Mae loan, you can either:
   
   (1) Ask your mortgage bank if the loan is a Fannie Mae loan, or
   
   (2) Visit the Fannie Mae website (listed in Resources), where you can check your loan status online.

3. **Speak With Your Bank**
   
   Even if your mortgage is not held by Fannie Mae, more and more banks are exploring deed-for-lease plans of their own.
   
   If you are facing the loss of your home due to foreclosure, but still desire to stay in the home, then ask your bank if a rent-back at market rental rates is a possibility.

4. **Clarify the Terms**
   
   D4L homes are generally rented for a period of 12 months, after which the bank may opt to force eviction. Make sure you are clear on what the lease terms are, and whether there is an option for rental beyond the initial period.

Resources

• More on Deed for Lease
• Fannie Mae Mortgage Lookup

[vallain]

on 11/16/2009 People are searching for ways to deal with pending foreclosure. This idea to rent back their house might help some.

[ScarlettOHairy]

on 11/13/2009 Timely information for options for homeowners or former homeowners.