A sale lease back is common to the world of commercial real estate. Now Fannie Mae is following the same trail by introducing a deed for lease program to benefit residential home occupants facing foreclosure.

To quote the vice president of Fannie Mae, the deed for lease program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications.”

Created to “eliminate some of the uncertainty of foreclosure, keep families and tenants in their homes during a transitional period and help stabilize neighborhoods and communities” this program gives homeowners one more option to avoid the foreclosure process.

The fundamental qualifications for selling owners are to occupy their home, to have exhausted loan modification options, to be released from any subordinated liens and to document that the new market rental rate is no more than 31 percent of their gross income. These criteria satisfied, the homeowner receives a lease for up to 12 months and the possibility of a term renewal or month to month occupancy.

There may be an altruistic theme in this new program, but the main thrust is likely to defer the long predicted second wave of foreclosures.

Lenders, including Fannie Mae, become home owners by the foreclosure process. Just as any home owner they are reluctant to put their property on the market if there are indications of recovery.

In addition to not wanting to sell in adverse conditions, lenders have slowly come to realize that all options — loan modification, short sale and now deed for lease — are better financial options than outright foreclosure.

To foreclose on a home is the last choice for lenders in minimizing their financial losses; the timely process itself, the physical damage, the selling costs and submitting to public bid have proven to be 20 to 30 percent less profitable than other options.

The weathering of the housing meltdown is new turf for all participants. Solutions and options are invented as the markets and conditions call for them. First was the appeal for mortgage modifications, which has actually created a completely new business for some and service for others. As modifications solved debt problems for some, it has certainly not been good for all.

The short sale is the next salvation for the housing crisis. Long and complicated, the short sale process has saved the credit for some and created new opportunities for others. It is likely the evolution of these first two exercises gave birth to the third option of deed for lease.

Each of these three options is contributing to the avoidance of the long predicted second tsunami of foreclosures. Parties on all sides of the transaction have come to realize that formal foreclosure is the last economic option.

Lenders, like all home owners, realize that a home with occupants paying rent and caring for the property is a far better option than flooding the market and creating neighborhood blight, decreasing value across the board. As each new option comes with a solution, we can make the same conclusion about each; it’s about time.

Charles Bogue is a real estate broker in Napa. He can be reached at 486-5511 or e-mail: cbnapa@napanet.net.

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