Fannie Mae announced today it’s implementation of the Deeds for Lease Program (which name, interestingly, they have trademarked). I cannot begin to count the problems with this latest attempt by the government to sober up an alcoholic nation by supplying enough booze to drown a water hippo.
You can read the press release and imagine the nightmare yourself so I’m not going to recount it here, but I will point out one of the less reported aspects of this program that has the potential to cause a whole lot of those pesky unintended consequences our political leaders are so loathe to anticipate:
… (the borrowers or tenants) lease back the house at a market rate… Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income.
Interesting wording there at the end. It’s not clear at first glance, but what this means is that if the borrower – who has generally endured a financial hardship to begin with – doesn’t make enough money, they’re still eligible… the rent will just have to drop to below market. Well what could go wrong with a government/landlord artificially lowering rents throughout the nation… That shouldn’t bother real estate investors… or anyone who works with real estate investors… or anyone who owns real estate near a real estate investment, should it? I’m sure the people who paid $70,000 for $30,000 trailers that are STILL housing people post Katrina know exactly what they’re doing.
Filed under: POLITICAL & ECONOMIC FOLLY , Deeds for Lease
