Mortgage to Lease : A Pilot Program Worth Flying?

As the calendar page turns with the start of a new Spring season, all eyes [in the Real Estate world] are on the pilot program introduced by Bank of America.  This program, aptly named Mortgage to Lease, is a new alternative to foreclosure which has the real estate world stirring with newfound optimism.  The Mortgage to Lease program will initially be extended by Bank of America to 1,000 homeowners within Arizona, Nevada and New York who fit the pre-screening criteria, but analysts are hopeful the program’s initial success and popularity will lead to further expansion, possibly even nationwide. 

Bank of America is currently screening for homeowners who are at least 60 days behind on their mortgage payments, have been declined a loan modification, and who owe more than their house is currently worth.  Much like the well-known practice of deed-in-lieu of foreclosure, homeowners will be asked to deed their properties back to their lenders [i.e. Bank of America].  However, home occupancy rights will not be surrendered with the forfeit of home ownership in this program, as these former owners will be permitted by their lenders to rent the house at or below market rents for a period up to three years.   As seen previously with deed-in-lieu cases, all existing loan balances will be forgiven.  For all my Los Angeles readers out there, credible sources have mentioned this Mortgage to Lease pilot program will soon be offered in Los Angeles County by Bank of America, with an added wrinkle of the opportunity to buy back the home at fair market value after the three year rental period has expired. 

As homeowners and investors alike closely monitor the Mortgage to Lease program, so too can we expect to see the other major banks keep a close distance to this pilot program.  If said program is executed properly and received by the public as it is intended, it is not too farfetched to believe the Mortgage to Lease program will be offered by other lenders to more homeowners across the country.