Bank of America's pilot program will offer about 1,000 consumers
in three states the opportunity to give up the titles to their
properties in exchange for bank forgiveness of their mortgage debts.
Bank of America plans to offer a small number of customers facing foreclosure the option of remaining in their homes and renting the property instead. The program highlights investors' increasing interest in becoming landlords for troubled properties.
Under the terms of the pilot program, which will be offered initially to about 1,000 consumers in New York, Nevada and Arizona, homeowners will give up the titles to their properties in exchange for bank forgiveness of mortgage debts. They would then be able to rent the properties for as long as three years.
The rent payments would be less than the monthly mortgage payments and be set at or below market rates, according to bank officials.
At first, Bank of America would retain ownership of the properties. Later, it would sell them to outside investors. If the pilot program, known as Mortgage to Lease, is successful, the bank could expand it.
A wide variety of institutional investors, including some large private equity firms, are evaluating potential deals in the beaten- down housing market. Bank of America's approach could offer properties for investors who are looking for opportunities.
For consumers, however, the window is small. Bank of America will not be seeking applicants or taking volunteers for the pilot program; instead, it will select and invite customers to participate. The bank has already started making contact with potential participants.
"There isn't much of a question about investor interest," said Dan Frahm, a spokesman for Bank of America. "What we're testing for is customer interest."
To qualify, a consumer must hold a mortgage owned by Bank of America, have been delinquent for more than 60 days, still live in the home and have exhausted other options. Homeowners whose mortgages are serviced by Bank of America but owned by other investors, like Fannie Mae or Freddie Mac, would not be eligible for the pilot program.
"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," Ron D. Sturzenegger, Legacy Asset Servicing executive at Bank of America, said in a statement.
He continued: "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."
"Our priority is designing a solution that helps our customer," Mr. Sturzenegger added. "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."
Most Popular Stories
- SEO Traffic Lab Celebrate Wins at Digital Marketing Event 'Internet World 2013' in London
- Social Media Initiatives Should Follow Customers' Lead
- Apple CEO: Offshore Units Not a 'Tax Gimmick'
- U.S. Senate Accuses Apple of Large-scale Tax Avoidance
- UTEP Water Recycling Project Wins Venture Titles
- Marketo Makes a Mint in IPO: Stock Shoots Up More than 50 Percent
- Bieber Booed at Billboard Awards
- Crude Oil Up, Gasoline Down
- Austin Startup Compare Metrics Raises $3.5 Million for Expansion
- Why So Many Top 'Car Guys' Are Actually Women