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Bank of America to offer rentals as foreclosure alternative

Thu, Mar 22, 2012 (9:54 p.m.)

Bank of America says it has begun a pilot program offering some of its mortgage customers who are facing foreclosure a chance to stay in their homes by becoming renters instead of owners.

The "Mortgage to Lease" program, which was launched this week, will be available to fewer than 1,000 BofA customers selected by the bank in test markets in Arizona, Nevada and New York.

Participants will transfer their home's title to the bank, which will then forgive the outstanding mortgage debt. In exchange, they will be able to lease their home for up to three years at or below the rental market rate. The rent will be less than the participants' current mortgage payments and customers will not have to pay property taxes or homeowners insurance, the bank said.

"This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support," Ron Sturzenegger, legacy asset servicing executive of Bank of America, said in a statement.

Among requirements to qualify for the program, homeowners must have a BofA loan, be behind at least 60 days on payments and be "underwater," owing more on their mortgages than their homes are worth.

The bank based in Charlotte, N.C., said it will at first own the homes, then sell them to investors. If the program is successful, it could be expanded to include real-estate investors who buy qualifying properties and keep the occupants on as tenants.

"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," Sturzenegger said.

Foreclosure tracking firm RealtyTrac says foreclosure activity has picked up in some states, as banks deal with a backlog of homes with mortgages that had gone unpaid yet remained in limbo due to delays stemming from foreclosure-abuse claims, according to

Nevada has the nation's highest foreclosure rate as of last month, with one in every 278 households in the state receiving a foreclosure-related filing, twice the national average, according to RealtyTrac. Arizona ranks third behind California, while New York has not been as hard hit, with one in every 4,604 households receiving a foreclosure-related filing.

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Discussion: 4 comments so far…

  1. "Bank of America says it has begun a pilot program offering some of its mortgage customers who are facing foreclosure a chance to stay in their homes by becoming renters instead of owners. The "Mortgage to Lease" program, which was launched this week, will be available to fewer than 1,000 BofA customers selected by the bank in test markets in Arizona, Nevada and New York."

    And there's about 100x that number of foreclosed homes just in the greater Vegas area alone. Thanx for nothing, BofA.

    Not a whisper about any safeguards in place to ensure this and every other banks prove bona fide note holder status before pressuring homeowners to sign over their property for the illusion they own their homes.

    "If you're going to take my house away from me, you better own the note." -- Joe Lents (who hasn't made a payment on his $1.5 million mortgage since 2002) in Bloomberg's 2/22/08 "Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish"

  2. The banks have realized that foreclosures are much more costly than taking possession via this scam. Selling out to investment companies, pocketing the rent, and unloading a toxic asset all at the same time. A sad day for the community as a whole.

    In three to five years, if this scam continues, it is very likely that huge sections of the city/county will be rental property and subject to the whims of large, faceless, investment companies.

    In the meantime, communities that still have HOA restrictions on rentals will see house prices skyrocket. This because homeowners living in investment communities will flee knowing that the neighborhood will "go south" due to transient, lower income, lower quality renters.

    Communities thrive best when the homes are owner-occupied.

  3. I for one say, good for you B of A. This is only a test but the ones selected for the test wiil have their balance forgiven and I think their credit report repaired. I think this is a great idea and I hope it is a great success and others follow along..