As long as the lease is over 1/3 less than their original payment (no tax break for renters) then it might work. I suspect the outcome will be the same as loan mods, a good 60% will still end up losing their homes.
The biggest way it helps is in the legal cost. It saves them thousands of dollars. It also gives them time to look for a rental if they desire to move while it also could be nice if the kids are almost through with the school year or graduation ect.
A Deed for Lease Program provides an additional option for homeowners who are facing foreclosure and are not eligible for modifications but qualify for this program. The program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period.
Borrowers who do not qualify or can sustain other solutions, such as a loan modification can, under a Deed for Lease, transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.
It's an interesting question. Pros: Emotional and Pride Reasons - Don't have to move, find a new house (might not find what you want to replace the home) and keep the kid's friends - schools. - Chances are you can rent more house vs the PITI and maintenance of homeownership and management - Chances are they wont sell the house while you are renting, as long as you are on time; the term can be 5 years while you save up some cash to buy it back.
Negative - Big one is you are a TENANT, not an OWNER. Might be a real emotional blow.
I'd do a PLUS and MINUS "Ben Franklin Analysis" and see which decision makes the most amount of sense. See http://www.adams-hall.com/ifyouhavtrou.html to make a prudent decision. Good luck! Brian Gibbons
It doesn’t, the homeowner now becomes a renter. There are many theory’s on why they are doing this, but it doesn’t help the former homeowner. Except if they want to stay in that particular house and can afford the rent.