Hat tip to ProfHoff and Susie who sent in stories about the BofA “Mortgage-to-Lease” program:
Excerpts from wsj.com:
Executives last year began to ask themselves “isn’t there a way to sort of combine that whole process and keep the borrower in the property? It’s just better for the market,” said Ron Sturzenegger, the Bank of America executive who last summer was put in charge of the unit that handles troubled mortgages.
The initial pilot is limited to loans that Bank of America holds on its books. Homeowners can’t apply for the program—only those who receive letters from the bank can participate.
Borrowers would agree to a what is known as a “deed-in-lieu” of foreclosure, where they essentially sign over ownership of the property to the lender. This is less costly to the bank and also does less damage to a borrower’s credit than a foreclosure.
Borrowers selected for the program must be at least two months past due on their mortgage and face considerable risk of foreclosure. Bank of America is reaching out to borrowers who have exhausted other alternatives to foreclosure or who haven’t responded to earlier solicitations. Homeowners with second mortgages or other liens won’t be selected.
http://online.wsj.com/article/SB10001424052702304724404577297904070547784.html
Excerpt from cnbc.com:
“Pilot participants will transfer title to their properties to the bank and have their outstanding mortgage debt forgiven. In exchange, they may lease their home for up to three years at or below the current market rental rate,” according to a statement. The rent will be less than the mortgage payment and the (former) homeowner will have no financial obligations to the property, like taxes and insurance.
Bank of America will work through property management companies to handle the pilot. A Bank of America spokesman tells CNBC, “We’ll own the properties only in the pilot and only initially. If a decision is made to roll out a full program, Bank of America would not be in the ownership position at all.”
evict them and get the home on the market for sale.
Freddie & Fannie mae have much the same plan starting in April.
Rent to Own. Coming to a housing market near you. With all the investors in rental properties I’m sure this day is coming, especially if tenants become hard to find.
The problem with that program is the “free ride” would end. How many of these people want to start making a housing/rent payment again, life is good when you can live for free.
With (soon-to-be-a-penny-stock imo) B of A long list of successes recently, such as Countrywide, proposed debit card fees and random charges you just know with that kind of upper echelon talent and valuable decision making top managers they will do a really great job with this program.
Better stay long B of A. . .
USA, a great country of people helping people.
So banks that used TAXPAYER money to bail themselves out are now deciding to sit on properties and rent them out instead of liquidating the assets and paying back the loan.
This sucks because it keeps prices high guaranteeing a large percentage of people will never own a house. This is what banks want because it creates a class of people that will always be dependent on them for a place to live.
Um…Bank of America paid back all of their loan with interest, as have most of the other TARP banks. GM and Chrysler are another matter…
BofA needs to be broken up…it’s a bumbling behemoth.
Jay,
From…
http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program
In a January 2012, review, it was reported that AIG still owed around $50 billion, GM about $25 billion and Ally about $12 billion. Break even on the first two companies would be at $28.73 a share versus then-current share price of $25.31 and $53.98 versus then-current share price of $24.92, respectively. Ally was not publicly traded. The 371 banks that still owed money include Regions ($3.5 billion), Zions Bancorporation ($1.4 billion), Synovus Financial Corp. ($967.9 million), Popular, Inc. ($935 million), First BanCorp of San Juan, Puerto Rico ($400 million) and M&T Bank Corp. ($381.5 million).
50+25+12+3.5+1.4+.968+.935+.400+.381=
94Billion 584Million still outstanding just from the citation above.
From…
http://en.wikipedia.org/wiki/List_of_countries_by_external_debt
The entire national debt of Brazil is 311Billion
I think there’s still a few pennies left to pay back.