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Bank of America Getting Into the Landlord Business

Bank of America Homeowner Rent Program

Bank of America, the nation’s second-largest lender, is launching a pilot program this week that will offer a limited number of customers behind on their mortgages to transition from owner to renter.

The bank, which was saddled with thousands of delinquent loans when it took over mortgage giant Countrywide, says that beginning this week “in targeted hard-hit markets,” it will offer a limited number of mortgage customers who are facing foreclosure an opportunity to remain in their homes, and transition to tenant status. The program is called “Mortgage to Lease.”

“This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support,” said Ron Sturzenegger, Legacy Asset Servicing executive at Bank of America in a statement. “This program may have the potential to further round out the broad set of solutions we offer our customers in need of assistance.”

Here are the qualifications for this ‘pilot program’:

  • Borrowers would agree to a what is known as a “deed-in-lieu” of foreclosure, where they essentially sign over ownership of the property to the lender.
  • Former owners would be offered one-year leases with options to renew the leases in each of the following two years at rents that the bank determines are at or below the current market price.
  • The bank began sending letters Thursday offering leases to 1,000 homeowners in Arizona, Nevada and New York.
  • Borrowers would have to demonstrate an ability to pay the market rent. In other words, the former owners would have to apply to lease their homes back from BofA.
  • Rents would be based on a BofA formula. For example, a soon to be former owner with a $250,000 mortgage and monthly payments of $1,600 could swap the house for a lease, renting the home for $900.
  • Borrowers selected for the program must be at least two months past due on their mortgage and face considerable risk of foreclosure.
  • Bank of America is reaching out to borrowers who have exhausted other alternatives to foreclosure or who haven’t responded to earlier solicitations.
  • Homeowners with second mortgages or other liens won’t be selected.

Watch this video. Did  the Bank of America Executive correctly say that they were going to set the rents to be below market? How will that work out for the other local land lords who have mortgages?  Also, why would someone who is living in their home for free…not making payments…all the sudden want to become a tenant and pay a lease….”

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