02 Jul Homeowners Become Renters as BofA Tests New Foreclosure Alternative
If fewer foreclosures create a brighter future for the housing market, Bank of America is doing its part to help out. This spring, a test segment of “underwater” BofA borrowers were invited to participate in the lender’s “Mortgage to Lease” initiative. Instead of enduring the foreclosure process and being evicted, borrowers could stay on in their homes as renters. The title is returned to BofA, and their mortgage debt is forgiven. The homes may then be later sold to investors.
The program began back in March when BofA sent letters to select borrowers in Arizona, New York, Nevada. As a sign it may be taking off, the program expanded to include California in May.
During the test phase, the lender hand-picks homeowners who are at “considerable risk” of foreclosure from the small pool of mortgages the bank actually owns (85% of home loans for which BofA collects payments are owned by investors in mortgage securities). They must be delinquent on payments by at least 60 days, have exhausted all loan modification programs, and owe more than the home is worth.
Continuation of the program depends upon its success. Ron Sturzenegger, a Bank of America executive, said in a statement back in March, “If this evolves from a pilot into a more broadly based program, we also see potential benefits from helping to stabilize housing prices in the surrounding community and curtail neighborhood blight by keeping a portion of distressed properties off the market.”
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