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Bank of America to Offer Pilot "Mortgage to Lease" Program to Some Homeowners

Written By:
April 02, 2012 at 3:41 PM

Homeowners, who live in homes that are worth less than the loans they owe, and have a loan owned by the Bank of America, may have the opportunity to get from under the financial burden that has overwhelmed more than 11 million Americans. Bank of America intends to provide a small number of borrowers the chance to have their mortgage debts wiped clean and to stay in their homes as renters.

The bank will only offer the option to fewer than 1000 borrowers in Nevada, Arizona and New York. According to the Bank of America, Legacy Asset Servicing director Ron Sturzenegger, the bank will evaluate the program and determine its acceptance among customers, investors and the community.

Mortgage to Lease Eligibility

After the borrower has transferred ownership of the property to Bank of America, the institution will complete the necessary paperwork that forgives the outstanding balance owed on the mortgage. The new renter will have a lease period up to three years.

Eligible borrowers for this program must meet the following eight criteria:

  1. Has a mortgage that is owned by Bank of America
  2. Delinquent mortgage payments of more than 60 days
  3. Borrower has depleted mortgage modification options or failed to take action, such as deed- in -lieu or short sale
  4. Have a high loan- to- value ratio
  5. Faces likely foreclosure
  6. Has no junior liens on the property
  7. Live in the home as a primary residence
  8. Have the necessary income to pay for the rental

Borrowers who have loans owned by other mortgage lenders, but serviced by Bank of America—about 9 million homeowners, do not qualify for this option. The bank intends to have property management companies manage the properties. Bank of America still has to determine how much rent to charge for the homes, which some expect to fall below prevailing market rental rates.

The success of the pilot program will determine if Bank of America offers this opportunity to homeowners in other states who have underwater mortgages.

Benefits to Borrowers

Borrowers who fail to qualify for any of the available options, such as Home Affordable Refinance (HARP), Home Affordable Modification Program (HAMP), the FHA streamline mortgage refinance program or Bank of America’s in-house programs, may have no other choice available at this point-- other than foreclosure. In the last few months, Bank of America, as well as other mortgage lenders has accelerated the number of borrowers in the foreclosure process.

Homeowners who take advantage of Bank of America’s offer will avoid a blemish on their credit records an argument or have to face finding a rental unit with a blemished credit record. Borrowers who reside in jurisdictions that allow mortgage lenders to file lawsuits for deficiency judgments will also not have to worry about having to pay up the difference between what the foreclosed homes command from foreclosure auctions and any remaining balance.

Some pundits believe that few homeowners will look to this program as a viable option for their predicament, especially in cases where borrowers have remained in “foreclosure limbo” for a few years. The critics believe homeowners would likely continue living in their properties without paying anything and save their money.





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