I read it in the Times!

An item on the distressed property front caught my eye today.  News reports say Fannie Mae will allow borrowers undergoing foreclosure the option of renting the home.

This so-called "Deed for Lease" program will allow owners to transfer title to Fannie Mae, and then sign a one-year lease to stay there.  A month-to-month extension is possible, and owners must demonstrate thay they can pay the rent.  Rental amounts will be at market and will be established by the management company running the program.

Some owners have been hoping for something like this so they don't get tossed out on the street after foreclosure. It may beat a short sale or loan modification.  Too soon to tell, but it may be a good thing.

WARNING: The assessability of deficiencies is part of the foreclosure statutes. This program of Fannie Mae's, as I understand it, is a deed-in-lieu of foreclosure variation. If you do a deed-in-lieu, you will not fall under the foreclosure statutes, since you're not being foreclosed on. Therefore, you could be subject to a deficiency judgment if you enter into this or any other deed-in-lieu caper.

While I'm at it, short sales do not exempt you from deficiencies (again, a short sale is not a foreclosure, so the statutes don't apply). If you're in a short sale, be sure you get a written agreement from your lender(s) that will exempt you. A lawyer, not a real estate agent, should advise on this document, and you may need tax advice as well.