A lifeline after foreclosure

There is new vocabulary in mortgage lending: D4L.

In order to be eligible for a D4L, or Deed for Lease, you must go through a DIL, short for a deed in lieu of foreclosure.

These terms become relevant when your house is underwater -- the market value is less than what you owe. You have attempted to sell your home without success, and your lender is threatening to foreclose. Instead, you ask your lender for a simpler solution: "Why not just take my house and save the expense involved in a foreclosure proceeding?"

But if the lender agrees, where will you live? Fannie Mae has instituted a new program that might help you. Deed for Lease allows some people who've lost their homes to remain in them as renters.

"This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities," Jay Ryan, a Fannie Mae vice president, said in a statement.

This is a new program, and the bugs and glitches will have to be worked out. However, there are predators out there who may attempt to take advantage of this program for their own benefit.

A few years ago, the Maryland legislature enacted laws aimed a curbing the abusive practices of what are called "foreclosure consultants" or "foreclosure rescue operators."

Here's how these scams work: You are in financial trouble and you see an advertisement saying that you can save your house. You call the company and meet with a "consultant" who makes the following proposal: "Sell me your house, and I will pay off your mortgage. You can rent the house back from me for a nominal monthly fee, and at the end of one year, I will sell you back the house at a price close to what I bought it for."

It sounds good, so you sign the document and convey your house.

But, in reality, the "consultant" is in cahoots with a fraudulent mortgage broker, and the consultant obtains a mortgage loan that is much higher than the price he pays you for the house. Then the consultant walks away from the property and lets it go to foreclosure but pockets the additional funds received from the new mortgage -- a fraudulent practice is known as "equity stripping" or "equity skimming."

By contrast, Fannie Mae's D4L program appears to be a valuable tool that can benefit many homeowners. But beware: If you are contacted by anyone who wants to discuss the Deed for Lease program, make absolutely sure that this is a legitimate person authorized to work with Fannie Mae.

Fannie Mae's D4L program is not for everyone. If you have a second loan on the property or if your existing mortgage is guaranteed or insured by a federal agency (the Federal Housing Administration, the Department of Housing and Urban Development, the Department of Veterans Affairs or the Agriculture Department's Rural Development program), you will not qualify. Clearly, this will eliminate a lot of homeowners.