Bank of America forecloure alternative: famlies can rent the home

March 23, 2012 by · Leave a Comment
Filed under: Real Estate News 

At first I was appalled when I finished reading this article.  This action is something that I have considered “could happen” down the road when the collapse was in full swing.  Now, after contemplating the idea of this happening, I think there could be some value with the right approach.  “If”, they keep the rental rates stable and competitive.   This is a much better option than having displaced homeowners hit their local existing rental markets, sucking up all the excess rental unit capacity thus making rents rise due too the increased demand.

Outside of any legal improprieties, this could be good if more rental units can come to market so rental rates can decline.   For middle and lower income earners, this increases their discretionary cash.  This is a good thing and results in a higher standard of living.  This is good.   I might add, the property owners that are now gasping because the have to service debt at a higher assumed rental rate.   Well don’t worry.   The banks should be compelled to re-finance these properties so we can lock-up the new rental rates.   The problems you see is when relief is only given to one set of parties when there is always at least two parties (even if its yourself).

There is some substance in this proposal if it was expanded and given across the board.  The logically at some point down the road maybe a “lease to own” program could be established to get home purchases to be made at the proper market price.  There are areas where you allow the market to determine the outcome and then and only then, you create programs to give the assistance where it is needed to prevent having major breakdowns.  Balance is the goal and difficult to find when you are dealing with various parties, I do not doubt this.

CNN – Bank of America has announced a program that will let homeowners facing foreclosures stay in their homes as renters.  The “Mortgage to Lease” program will start as a limited pilot program for up to 1,000 homeowners in Arizona, Nevada and New York selected by the bank.

The bank said if the effort succeeds, it could be expanded to the broader group of at-risk homeowners with BofA mortgages. Homeowners can not apply to be part of the program at this time.

Those selected for this initial pilot program will be more than 60 days delinquent on their home loans, have high loan balances in relation to their current property value, have no other liens on their property, and have an income level high enough to afford the rent.

The homeowner will transfer title to their properties to the bank and have their outstanding mortgage debt forgiven. In exchange, they may lease their home for up to three years at or below the current market rental rate.

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