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Pilot “Mortgage to Lease” Program offers New Option to Foreclosure

by Amy Lillard

As the housing market continues to struggle nationwide, and homeowners who are underwater on their mortgages look for relief, one mortgage lender has developed a new program that may eventually represent an important new alternative to foreclosure.

Bank of America is piloting a small “Mortgage to Lease” program with mortgage customers facing foreclosure. The program promises an opportunity for these customers to remain in their homes as tenants rather than owners.

The pilot group of less than 1,000 customers will be invited to participate by Bank of America; no volunteers or applicants will be accepted. The initial invitations have begun to preselected customers in test markets in Arizona, Nevada and New York. These states were chosen as they were especially hard hit by the housing bust.

Bank of America officials say the program is designed to alleviate one of the major anxieties of homeowners facing foreclosure - the need to move from their homes. In addition, the program will evaluate whether transitioning to tenant status can help customers, and represent a new direction for lenders industry wide. Officials hope a successful program will ultimately help to stabilize housing prices in communities.

The pilot group will consist of customers who:

• Have loans owned by Bank of America
• Are delinquent on mortgage payments for more than 60 days
• Have explored and exhausted other solutions, including mortgage modifications, or have not responded to foreclosure options like short sale and deed-in-lieu
• Have high loan balances compared to current property value
• Face significant risk of foreclosure
• Do not have junior liens
• Still occupy their home
• Have income to cover affordable rent payments

Those invited to participate will transfer title of their properties to Bank of America. Their outstanding mortgage debt will be forgiven, and they will be relieved of homeownership obligations like property taxes and hazard insurance.

In exchange, participants will lease their home for up to three years, renting at or below the current market rate. Rent will always be less than the participants' current mortgage payment.

Bank of America will own the participating properties, working with property management companies, but will eventually transition the properties to investor ownership.

If the pilot program proves successful, it may broaden to involve real estate investors purchasing properties and keeping the previous homeowners as tenants.

 

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More homeowners consider strategic defaults, perhaps to their detriment

Homeowners renting out underwater homes to move on

Underwater homeowner bailout considered with bank settlement

Extended EHLP (Read 'Help')deadline for homeowners facing foreclosure, employment struggles

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