Breaking: Fannie Mae To Rent Back Homes

This breaking now ... Lot of questions on first glance.

1) Is this a Fannie Mae bailout in disguise?   Fannie selling as help for homeowners, but given Fannie's precarious (and taxpayer owned) financial position, renting homes back may allow Fannie to delay the write downs that are inevitably coming and drag out the hit to what's left of its balance sheet.

2) Does Fannie still have to write down the lost value of home?   There is no way the rents will equal the mortgage payments, resulting in a large reduction of value for FNM on the note.

3) How many Fannie 'customers' will take advantage of this, even though they may not need it.   If you are underwater on your mortgage and want to sell but can't, why not simply get out of your mortgage, pay 50% of your cost in rent and save the extra coin?

Many questions ... but big program announcement from Fannie.

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Fannie Mae (FNM) will allow homeowners facing foreclosure to rent their homes for up to one year in a new program that represents the latest effort to help troubled borrowers remain in their homes while keeping a glut of foreclosed properties from hitting the housing market.

The Deed for Lease Program, which Fannie plans to roll out on Thursday, will offer borrowers who fail to complete or don't qualify for a loan modification or other workout to deed their property to the lender in exchange for a lease. Borrowers-turned-tenants will be able to sign leases of up to 12 months and will pay market rents, which in most cases are lower than the cost of mortgage payments.

Fannie Mae wouldn't say how many homeowners it expects will take advantage of the program. The company acquired 57,000 properties through foreclosure during the first half of the year, bringing its total real-estate owned inventory to 63,000 properties valued at $6 billion.

The rental program will allow Fannie to hold inventory off of already saturated housing markets and makes a bet that the housing market will be stronger one year from now. "If you keep more people in their homes, it's better for the community. It's better for the financial institutions that own those homes," says Jay Ryan, vice president of equity investments at Fannie Mae. "Hopefully less foreclosure product on the market will help stabilize those communities." Borrowers who haven't missed any mortgage payments aren't eligible for the program, and the borrower's mortgage servicer would have to show that a borrower isn't eligible for a loan modification before the homeowner could apply for the Deed for Lease program.