Last week, Bank of America announced that for a select group of homeowners currently facing foreclosure, they would have the option to remain in their homes after all. The catch? They don’t actually get to keep their homes… they have to rent it from the bank instead.
The bank has launched a pilot program called Mortgage to Lease, which will be trialed in the states of Arizona, Nevada and New York to begin with. BoA plan to offer the program to around 1,000 borrowers in order to gauge its effectiveness, reported the New York Times.
Participating homeowners will of course, be homeowners no longer. They will have to relinquish the title of their home, and in return for this all debts associated with their mortgage will be forgiven, and they will be allowed to rent their home from the bank for a period of up to three years.
Bank of America has promised that the rental payments will be in line with – or possibly even below – market rates for the area. In addition, BoA has promised that the new rental payments will be lower than what the borrower was paying on their mortgage each month.
Once the three-year rental period is up, the bank would then look to resell the home to investors, giving the former homeowner plenty of time to find somewhere new to live.
Ron Sturzenegger, Legacy Asset Servicing Executive at BoA, told the New York Times that in addition to benefiting borrowers, the program could have wider implications besides:
“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.”
BoA have said that the program will initially only be available to invited borrowers. Should it prove to be a success, the program will then be offered to other customers.
Mike Wheatley is a seasoned real estate writer and senior editor at Realty Biz News. He’s provided advice and information about the mortgage industry on a number of popular forums and websites for several years now. To see more of Mike’s work, please visit his website at www.contentsolutionsonline.com.