Bank of America Corp. (BAC) is offering a pilot program called "Mortgage to Lease" to certain mortgage customers facing foreclosure, which allows them to remain in their homes as tenants. The pilot will be conducted on a solicitation basis in select states and less than 1,000 customers will be invited to participate in the first phase. Arizona, Nevada and New York will be the test markets.
Ron Sturzenegger, Legacy Asset Servicing executive of Bank of America, said, "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."
The participants will have loans owned by Bank of America which are delinquent for over 60 days. They need to have high loan balances compared to their current property value and must be occupying the home. They should have no junior liens and should have adequate income to pay rent.
Further, the pilot will include customers who have exhausted modification solutions or have not responded to alternatives to foreclosure.
The participants will transfer the title of their properties to the bank and their outstanding mortgage debt will be forgiven. They may lease their home for up to three years at or below the current market rent.
The rent will be less than the existing mortgage payment, and the customer will not have homeowner financial obligations like property taxes and hazard insurance.
Initially, Bank of America will retain ownership of the properties and will work with property management companies to oversee these rental properties. Properties in the pilot program will be changed to investor ownership.
If the Mortgage to Lease program proves viable, a broader program may be launched with the potential involvement of selected real estate investors. These investors will purchase properties and keep the previous homeowners as tenants.
BAC closed on Thursday at $9.60, down from the prior close of $9.82, on 264.11 million shares.
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