Beginning this week, Bank of America will offer a limited number of mortgage customers who are facing foreclosure an opportunity to remain in their homes, but transition to tenant status, through a pilot program called Mortgage to Lease.
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, noted Ron Sturzenegger, Legacy Asset Servicing executive of Bank of America. This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support. This program may have the potential to further round out the broad set of solutions we offer our customers in need of assistance.
To maintain test controls, the Mortgage to Lease pilot will be conducted strictly on a solicitation basis; there will not be any opportunity for customers to volunteer or apply for consideration. Fewer than 1,000 customers will be invited to participate in the first phase of the pilot. Initial outreach has begun to preselected customers in test markets in Arizona, Nevada and New York, three states hit hard in the housing downturn.
Participants can’t owe on junior liens.
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. The rental payment will be less than the existing mortgage payment, and the customer will be relieved from certain other homeowner financial obligations, including property taxes and hazard insurance.
Initially, Bank of America will retain ownership of the properties, working with property management companies to oversee the rental properties.
Properties in the pilot program will be transitioned to investor ownership. If the Mortgage to Lease program proves viable, it may lead to a broader program, potentially involving selected real estate investors who would purchase properties that meet their predetermined specifications and keep the previous homeowners in place as tenants.
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