Can't pay the mortgage? You still might be able to stay in your home. Government-controlled mortgage company Fannie Mae is going to give borrowers on the verge of foreclosure the option of renting their homes for a year.

The change announced Thursday could give a temporary break to thousands of homeowners, but critics question whether it will only add to the mushrooming losses at the company, which has received billions in taxpayer money.

The new "Deed for Lease" program will allow homeowners to transfer title to Fannie Mae and sign a one-year lease, with potential month-to-month extensions after that. It also helps save money because the lender does not need to complete the often lengthy and time-consuming foreclosure process.

The 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.

It also does less harm to the borrower's credit record.

"It shows that you put your best effort to work out a solution," said Gabe del Rio, director of homeownership at Community HousingWorks of San Diego.

However, Mike Himes, director of homeownership services at NeighborWorks Sacramento, said the industry should push harder to modify loans at lower monthly payments. "The preferred option is allowing people to retain ownership," he said.

Fannie Mae executives said the rental program is designed to help delinquent homeowners who don't qualify for a loan modification, but still want to stay in their homes.

To qualify, homeowners have to live in the home as the primary residence and prove that they can afford the market rent, which will be established by the management company running the program. Rents are based on current market rates.

The plan is expected to be particularly attractive in places like Phoenix or Orange County, Calif., where homeowners are stuck paying large mortgage bills on properties that are now worth far less than they originally paid. At the same time, rents have been falling in those areas. So by renting the same house, former homeowners could wind up paying far less every month.

In Orange County, for example, the average monthly rent for all apartments was about $1,450 in September, down nearly 8 percent from a year earlier, according to research firm MPF Research. In Phoenix, the average renter paid about $720, also down about 8 percent from last year.

Still, the effort is likely to attract a relatively small number of homeowners.

In the first nine months of the year, Fannie Mae took ownership of nearly 2,000 properties through a process known as a deed-in-lieu of foreclosure. That pales in comparison to the 90,000 foreclosed properties the company repossessed in the period.

Deed-in-lieu works like the new program, allowing homeowners to turn over title to Fannie Mae, but rather than renting, the owners simply walk away.

While Fannie Mae executives say the company's motives are community-minded, critics say the company is simply gambling that the properties will eventually sell for a higher price. That's folly, says Peter Schiff, president of Euro Pacific Capital in Darien, Conn., and a longtime bearish investor.

"Taxpayers are now going to own all these houses that (Fannie Mae) should have unloaded," he said. "It's going to cost a fortune."

The announcement came as Fannie Mae asked for an additional $15 billion in government aid after posting another big loss in the third quarter. The mortgage finance company, seized by federal regulators in September 2008, posted a quarterly loss of $19.8 billion, including $883 million in dividends paid to the Treasury Department. Continued...