This is big news.

The Deed For Lease program could significantly impact the real estate market and many people’s lives, depending on how it is implemented.

Fannie Mae (FNM/NYSE) is implementing the Deed for Leaseâ„¢ Program under which qualifying homeowners facing foreclosure will be able to remain in their homes by signing a lease in connection with the voluntary transfer of the property deed back to the lender.

I don’t know what it takes to qualify for this program but it would be a gift from the heavens for many families. The market rent in many cases will be far lower than their current payments, (principal, interest, taxes, insurance, HOA fees and maintenance). And they don’t have the costs and disruption to the family of moving out. It seems like it could be the ideal solution for many families that got in way over their heads.

Anybody know how a “deed in lieu of foreclosure” effects someone’s credit rating and ability to borrow money compared to a short sale or foreclosure? Is it treated the same as a foreclosure? Or are its effects less than those of a short sale?

This program will cost Fannie Mae a fortune. (What else is new?) But they may not be able to afford it for long so check it out ASAP if you might qualify. The first important question you have to answer is, “Does Fannie Mae hold your mortgage.”

Here’s the take from the Washington Post.

The plan is expected to be particularly attractive in places like Phoenix or Orange County, Calif., where homeowners are stuck paying large mortgage bills on properties that are now worth far less than they originally paid. At the same time, rents have been falling in those areas. So by renting the same house, former homeowners could wind up paying far less every month.

In the first nine months of the year, Fannie Mae took ownership of nearly 2,000 properties through a process known as a deed-in-lieu of foreclosure. That pales in comparison to the 90,000 foreclosed properties the company repossessed in the period.

Here’s another take on the Deed For Lease program.

” To the extent that this initiative helps alleviate homeowner pain and leads to better borrower cooperation with DIL proceedings, it should marginally expedite buyout timelines by increasing the share of DILs at the expense of foreclosure sales.”

And that article says Fannie Mae may try to sell the property back to the renter (former owner) somewhere down the line! Current homeowners can’t beat that.

I gotta think about all this but my first impression is that this is a spectacular program for many folks who are severely underwater and who have Fannie Mae mortgages.

I just wonder how many people will qualify for the program.