Bank of America has launched a pilot program that will allow homeowners facing foreclosure to ‘transition to tenant status.’
The bank's Mortgage to Lease program will be tested in select markets in Arizona, Nevada and New York. Participants must be delinquent for more than 60 days and, according to the bank, have ‘exhausted modification solutions or have not responded to alternatives to foreclosure, including short sale and deed-in-lieu.’ Participants must also have high loan balances in relation to their current property value and present evidence that they have the adequate income required to make rent payments.
Pilot participants will transfer their property title 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.
‘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,’ says 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.’
Initially, Bank of America will retain ownership of the properties and work with property management companies to oversee the rental properties. Properties in the pilot program will be transitioned to investor ownership.
‘Our priority is designing a solution that helps our customer,’ adds Sturzenegger. ‘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.’