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.
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.”