Email
Password
Remember meForgot password?
    Log in with Twitter

article imageBank of America tests 'Mortgage to Lease' plan for foreclosures

By Leigh Goessl     Mar 25, 2012 in Business
Bank of America has announced it is in the midst of unrolling a new program called "Mortgage to Lease." This plan is to be offered to selected mortgage customers facing foreclosure.
What BofA says it will do is allow these customers to "remain in their homes, but transition to tenant status."
According to Bank of America's press release, the pilot program will only be available to those customers selected by the bank, no applications or volunteers are being accepted at this time. In total, less than 1,000 customers will be invited to participate in this phase.
“When homeowners are struggling to make payments, owe more on their mortgage than their home is worth and face certain foreclosure, one of their greatest anxieties is the transition process they face in moving from their home,” noted Ron Sturzenegger, Legacy Asset Servicing executive of Bank of America.
“This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support. This program may have the potential to further round out the broad set of solutions we offer our customers in need of assistance," Sturzenegger said.
The first phase will include customers in Nevada, Arizona and New York, according to BofA's statement.
How it will work is those individuals entering the Mortgage to Lease program will transfer property titles to the bank and their mortgage debt will be forgiven. In exchange for this transfer, the homeowner will become a tenant for up to three years "at or below the current market rental rate."
Benefits to the consumer are listed as relief from property taxes and hazard insurance, along with other financial obligations.
In order to qualify for this program, a customer will have to meet specific criteria which includes: loans owned by BofA, be over two months delinquent in payments, be facing a high risk of foreclosure, living in the home, can afford to make a rent payment and possess no junior liens, and "have exhausted modification solutions or have not responded to alternatives to foreclosure, including short sale and deed-in-lieu,"outlined Bank of America.
After a period of time the bank will relinquish ownership of the home to an investor. If this pilot program is a success, the bank is considering broadening the program.
“Our priority is designing a solution that helps our customer,” said Sturzenegger. “If this evolves from a pilot into a more broadly based program, we also see potential benefits from helping to stabilize housing prices in the surrounding community and curtail neighborhood blight by keeping a portion of distressed properties off the market.”
Will it be more cost-efficient for those at risk for foreclosure?
Currently rentals are in high demand thanks to the struggles created by the housing bubble as many either have already experienced foreclosure or are heading into it. People are giving up on pursuing homeownership and looking to rent.
However as the demand curve shifts, rent prices are on the increase. CNN Money points out that buying is cheaper than renting.
"Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring homeowners face," Jed Kolko, Trulia's chief economist, CNN's report shared.
Market Watch noted that a deal, such as the Mortgage to Lease program offered by Bank of America, might be more attractive than eviction for consumers, but said it's a "bank-first" program.
"It keeps homes occupied, helping neighborhoods and helping to keep the value of other properties at-risk higher," Market Watch said, noting loan modification programs that reset loan balances and payments to current market rates would be a better solution.
More about Bank of America, Bofa, mortgage to lease, Foreclosures, Mortgages
More news from
Latest News
Top News