Bank of America recently announced a program to allow some struggling homeowners to sign their deed over to Bank of America (similar to a deed-in-lieu) and then rent the home back for up to three years. This pilot program, called “Mortgage to Lease,” will initially be tested in only Arizona, Nevada, and New York and will be offered to less than 1,000 of their customers. Bank of America will hand select the participants and reach out to them. Unfortunately, there is no way to apply for the program as indicated on Bank of America’s press release, “there will not be any opportunity for customers to volunteer or apply for consideration.”
According to Bank of America, those who successfully complete the program will be forgiven of their mortgage debt. They will then be expected to rent their home back at market value, which would presumably have to be less than their current mortgage payment for their participation to make sense.
It’s a very narrow scope of who would qualify for this program. The loan must be delinquent for more than 60 days, the home must be owner-occupied, foreclosure seems inevitable, no second liens, you have to be able to afford the market rent payment, and the loan has to be owned by Bank of America (even if you currently make your mortgage payments to BofA, they may not technically own the loan).
My assumption is that we’ll likely not see this in Flagstaff, at least not initially. I’m guessing they’d want to stick to a few large markets to get the administrative efficiencies of dealing with fewer property managers and analyzing fewer rental markets. I’d be curious to hear from anyone in Arizona who’s solicited for the program outside of the Phoenix area.
Keep in mind that Bank of America is only offering this to 1,000 people, which represents a very small fraction of all their customers facing default. Even if a homeowner isn’t contacted for this program, it’s important that they know there are often better options than foreclosure. Many people could still be eligible to do a short sale and avoid many of the consequences of foreclosure.
Bank of America Press Release
Distressed Property Institute
Special thanks to Alex Charfen of the Distressed Property Institute for keeping us CDPE®’s up to date on these issues.
As a disclaimer, this is not intended to be advice, legal or otherwise. It is also not intended to be an official or comprehensive guide to this program, as their terms could change. See Bank of America’s website for more information.