Bank of America is allowing a small number of customers facing foreclosure to remain in their homes and rent the property instead under a new housing rental program being tested by the company. The pilot program, called Mortgage to Lease, will be limited to specific areas of the country at first and if it is successful, the bank could expand it to more states. Bank of America will not be asking for applicants or accepting volunteers for the pilot program.
Under the program, about 1,000 homeowners in New York, Nevada, and Arizona will relinquish the title to their property in exchange for bank forgiveness of their mortgage debt and would be able to rent the property afterward for up to three years. According to bank officials, the rent payments would be less than the monthly mortgage payment and be set according to market rates.
Bank of America would retain ownership of the properties and have the option of selling them to outside investors. The move by Bank of America could offer up properties for potential investors who are looking for opportunities. Investors are increasingly interested in becoming landlords for troubled properties. Dan Frahm, a spokesman for Bank of America, said, “There isn’t much of a question about investor interest. What we’re testing for is customer interest.”
The qualifications for the program are stringent. The homeowner must hold a mortgage owned by Bank of America, be more than 60 days delinquent, still reside in the home, and have exhausted all of their other options. Homeowners with mortgages serviced by Bank of America but owned by other investors, like Fannie Mae or Freddie Mac, are not eligible for the pilot program. The 1,000 participants will be selected by the company and notified via invitation. Some participants have already been contacted.
Ron Sturzenegger, Legacy Asset Servicing executive at Bank of America, released a statement saying, “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. 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.”
