New Foreclosure Alternative Gives Homeowners a Second Chance

Bank of America recently announced a pilot program that would allow homeowners at risk for foreclosure to give the bank the deed to their house and signing a lease to rent at the market rate.  The program, dubbed “Mortgage to Lease,” will be tested on 1,000 at-risk owners in Arizona, Nevada, and New York.  This is a major change in how banks deal with at-risk owners: usually, banks try to reduce mortgage payments and, if that doesn’t work, forecloses the home and places it up for a short sale.  If Bank of America’s experiment works, the bank is looking at selling the property to investors who will make money off of the rent– investors have already been buying up foreclosed property and renting it out.  The program hopes to explore whether allowing homeowners stay in their homes as renters will reduce costs associated with foreclosing, maintaining, and selling the property.  If homeowners respond positively to the rental system, Bank of America might expand the program beyond its initial test group.

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