Starting today, thousands of borrowers facing foreclosure will be able to stay in their homes and avoid the trauma of being evicted. Fannie Mae's new "Deed for Lease" program allows impossibly situated borrowers to transfer their home ownership to Fannie Mae and sign a one-year lease, with month-to-month extensions after that. Yes, you still lose your home--but you avoid explaining to your kids why they have to squeeze into a crummy apartment and change schools, you don't have to schlepp from landlord to landlord and blush whenever they check your credit, and you don't have to add the joy of moving to your holiday celebrations. Not a small thing.The program is designed to eliminate some of the uncertainty of foreclosure, for instance children having to change schools during the year, and help stabilize neighborhoods shell-shocked by recession fallout. Tenants of landlords in default will also be able to benefit from the program, avoiding eviction by lenders when the owner fails to pay the mortgage.

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This is a variation on the practice of accepting a deed-in-lieu of foreclosure, which requires the owner to surrender the property and allows all parties to avoid expensive foreclosure proceedings. But it hasn't been widely used--in the first half of the year, Fannie Mae took back about 1,200 properties through this process, while foreclosing on 57,000 properties during the same period.

The rental program is designed to help homeowners who don't qualify for a loan modification under the Obama administration's Making Home Affordable plan, but still want to remain in their homes. Say for example that you are an unlucky homeowner in Las Vegas. You bought a $300,000 home with 5% down and a mortgage payment of $2,200 a month payment including taxes and insurance. Now that house is worth $150,000, you lost your job, and your new one only pays $2,500 a month. You don't earn enough to qualify for a modification under the Home Affordable Modification Program (yes, you discovered that under making Home Affordable, if you are too poor to make a modified payment, your lender will keep expecting you to make a larger one--go figure). However, you could easily pay the fair market value of the rent on the house at $775 a month. And Fannie Mae will not put your home up for sale during the one-year rental period.

To qualify for Deed for Lease, you have to live in the home as your primary residence and prove that you can afford the market rent. The rent can't be more than 31% of your household's gross monthly income. To see if you are eligible for Deed for Lease, contact your loan servicer.