Bank of America announced this week a new program for homeowners in distress. Initially, 1000 homeowners in three states, Nevada, Arizona and New York, will be invited to participate in a mortgage to lease pilot program. Should one qualify, you would transfer your property to the bank, have the balance of the mortgage forgiven and then lease the home back for up to three years at current or less market rate. The only loans which would qualify would be Bank of America held loans – also known as portfolio loans – not loans serviced by Bank of America or government backed loans, such as Freddie Mac, Fannie Mae, FHA or VA loans. Other qualifications include requirements to be 60 days delinquent in payments, you must live in the house, there can be no other liens on the house, there must be a high loan balance in relation to value and you must be able to make the rent payments. It’s an invitation only program; you cannot apply for it as you can for other options such refinances, modifications, or short sales.
So why is Bank of America trying out this program? If you guessed because it benefits them, you would be right. Bank of America is counting on housing prices going up over the next several years. They don’t have to go through the foreclosure process, but just have the property deeded over to them and they have instant income on it from the rental payments. Then they can sell it in several years and mitigate their losses. It improves the status of their loan portfolio and looks better on their balance sheets. Bear in mind that if Bank of America makes more money in short selling or foreclosing on the property, Bank of America will continue to do so.
For more information on this pilot program, go to lvrj.com/business/bank-of-america-experiments-with-foreclosure-alternative-144006296.html