Bank of America will offer struggling homeowners a chance to stay in their homes as renters.
The bank is starting a pilot program that will offer borrowers facing foreclosure the option to become tenants as soon as they transfer the title of their homes to the lender. The program, called "Mortgage to Lease," would forgive the borrower's outstanding balance on the mortgage once the lender becomes the owner of the home. The borrower would be able to rent the home for up to three years.
"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," says Ron Sturzenegger, Legacy Asset Servicing executive of Bank of America.
The first phase of the pilot will be available in Arizona, Nevada and New York and fewer than 1,000 borrowers will be invited to participate. Don't bother calling the bank to ask to participate. The lender says it will contact borrowers who are eligible and offer them the opportunity.
"This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support," Sturzenegger says.
Bank of America did not specify (or announce) how it will determine rent prices.
To qualify for the program borrowers must:
- Have loans owned by Bank of America.
- Be delinquent on their mortgages for more than 60 days.
- Have exhausted modification solutions or have not responded to alternatives to foreclosure, including short sale and deed-in-lieu.
- Have high loan balances in relation to their current property value.
- Face considerable risk of ultimate foreclosure.
- Have no junior liens.
- Be living in the home.
- Have adequate income to make an affordable rent payment.
Bank of America says, initially, it will remain the owner of the homes and will hire property management companies to oversee the rentals. The homes will later be sold to investors. If the pilot succeeds, the bank may implement a broader program.
What do you think of this program? Will it help borrowers?
Follow me on Twitter@Polyanad