Bank of America announced, they are rolling out a mortgage-to-lease program in California. The program is designed to allow the borrower to become a renter while the home is sold to investors. Borrower advocates say the approach, providing a cushion for homeowners at the end of their rope, is long overdue. They point out that mortgage giant Fannie Mae has had a similar “deed-for-lease” program for 2 1/2 years for the occupants of foreclosed homes it owns.
I suppose it is better late than never! I recall while I was working on a short sales many years ago, how upsetting it was to my clients to not only lose their home but to lose the community, schools and their familiar surroundings. They just couldn’t come up for the money they had accumulated and owned during the forbearance period bank had granted them for a year. They both had jobs and making enough money to pay the mortgage. It broke my heart to see what my clients went through, I remember we all cried at the closing table. This option to lease at least saves them financially because they don’t have to pay for moving expenses not to mention their dignity, they don’t have to tell all their neighbors and friends they have lost their house, at least not right away. At the time, I asked the loss mitigation specialist at the bank, if it was possible for my clients to lease from the bank rather than evacuating their house. I was so new at the business then and so naïve to know how much red tape had to be cut before something different could be done at these big institutes. The individual that was working with me was gracious enough to tell me that the idea was great but implementing it would take years. We ended up short selling the house and my clients rented a place. What a waste of money and time for my clients, as the rent they were paying was much the same amount they were paying for their mortgage. So I am very pleased to find out that BofA is rolling out a program in California to do just that. Allow the borrowers become renters. They are planning to phase this out in four states and depending on its success they will roll it out nationwide.
Keep in mind, Bank of America emphasized that its test program is limited to borrowers it selects, so homeowners can’t sign up themselves. It’s available only on mortgages the bank owns — just 15% of the home loans for which it collects payments. The other 85% are owned by investors in mortgage securities. The leases are for a year, with options for the residents to renew for two more years. Since the damage to credit ratings from deed-in-lieu transactions is erased after three years, the renters at that point would have an easier shot at buying a home again.
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