BofA Offers Leasing Program to Select Customers Facing Foreclosure
By: Esther Cho
In select hard-hit markets, Bank of America is introducing a program that will give some of its customers who are facing foreclosure the option to remain in their homes as a tenant rather than as a homeowner.
The Charlotte, North Carolina based-bank made the announcement Thursday in a release. The program, called Mortgage to Lease, will solicit fewer than 1,000 customers who qualify; there will not be opportunities to volunteer or apply for the program.
“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,” said 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.”
The current test markets are in three hard-hit states: Arizona, Nevada, and New York. Selected pilot participants will transfer their property title to the bank and have their outstanding mortgage debt forgiven.
Customers can lease their home for up to three years, and the rental payment will be less than the existing mortgage payment.
BofA will work with property management companies to oversee the rental properties. If the program is successful, it may expand and involve real estate investors who can purchase the properties and keep the previous homeowners as renters.
The announcement follows a recent government initiative to sell REO properties to investors and have them converted into rental units. In February, the first bulk of 2,490 REOs went up for sale, with 85 percent of the properties already occupied by tenants.
According to a recent report from Zillow, rent prices rose 3 percent from January 2011 to January 2012, while home values dropped 4.6 percent during that same period.
“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.”
As a foreclosure alternative, Fannie Mae offers a Deed-for-Lease program that allows struggling homeowners to transfer their title to the GSE and in turn, sign a lease to remain in the home for up to a year.
Eligibility requirements for Mortgage to Lease
Loan owned by Bank of America
Delinquent for more than 60 days
Already exhausted modification solutions or have not responded to alternatives to foreclosure, including short sale and deed-in-lieu
A high loan balance compared to current property value
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