Because there’s more money in being a landlord than there is in going through the lengthy foreclosure/auction/short sale process, Bank of America is testing a program that will let homeowners with delinquent BofA mortgages stay in their homes as renters.
The bank announced the program, dubbed “Mortgage to Lease” last night. Rather than look for volunteers or sift through piles of applicants, BofA says it will initially reach out to fewer than 1,000 customers in Arizona, Nevada and New York who meet all of the following requirements:
-Have loans owned by Bank of America.
-Are delinquent for more than 60 days.
-Have exhausted modification solutions or have not responded to alternatives to foreclosure, including short sale and deed-in-lieu.
-Have high loan balances in relation to their current property value.
-Face considerable risk of ultimate foreclosure.
-Have no junior liens.
-Are still occupying the home.
-Have adequate income to make an affordable rent payment.
To take part in the program, participants must transfer title for their properties to BofA in exchange for the bank forgiving any outstanding mortgage debt. They can then remain on the property for up to three years as renters. The bank says it will set rental rates “at or below the current market rental rate,” and that whatever the rent is, it will be less than what the homeowner’s monthly mortgage bill.
BofA says it will retain ownership of the properties but plans on eventually selling them to to investors.
And like any test program, if Mortgage to Lease is successful, it will expand beyond the pilot areas. The bank says it could possibly foresee making deals with real estate investors to take over more properties if they agree to keep the delinquent homeowners as tenants.