Bank of America announced this month that they will be offering a new program that allows struggling homeowners to start renting their homes rather than have them taken through foreclosure. The program, still in its beginning stages, will only test markets in Arizona, Nevada and New York, some of the states hit hardest by the housing crisis.
Homeowners that live within the test markets and have loans held through Band of America will only be eligible for the new program if BofA sends them a letter inviting them to participate, no one will actually be allowed to apply for the program. Also, the aptly-named “mortgage to lease” program will only expand if BofA concludes that avoiding foreclosure reduces costs associated with repossessing and reselling the properties.
The program is based on the simple “deed-in-lieu” process, which is used by many lenders to avoid home foreclosure. Through a deed-in-lieu (DIL) arrangement, the lender forgives the borrowers mortgage in exchange for the deed to the property. BofA will enter a DIL agreement with its borrowers and then lease them the homes for at or below market values, so long as the borrower can prove their ability to afford the terms of the new lease.
If the program remains successful for one year, BofA says it will allow the borrowers to continue to lease the homes for an extra two years, and will eventually sell the properties to investors seeking to buy rental properties.
Although the program is only in its trial stages, it is considered especially noteworthy because it marks a shift in mortgage relief practices by lenders. Typically, banks that own loans held by struggling homeowners will try to work the borrowers on either a mortgage modification or a principle reduction so that they will still receive some form of payment on the loan. Through the new program the loan is forgiven all together, and homeowners will be allowed to stay in their homes for a much lower monthly payment.
Keep following The Mortgage Law Group’s blog for more news on the latest mortgage relief programs offered by lenders, and for all of your mortgage relief or foreclosure defense questions be sure to call our law offices at (888) 591-6555.