Bank of America announced Thursday that it will pilot a program to turn distressed homeowners into renters in a few of the hardest-hit mortgage markets.
The mortgage-to-lease program would keep people in their homes and avoid foreclosure, while allowing the bank to forego the costly foreclosure process and keep a revenue stream coming in while homes are hard to sell.
“This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support," said Ron Sturzenegger, who runs Bank of America's division that is handling troubled mortgages, 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.”
Fewer than 1,000 people in Nevada, Arizona and New York will be asked to participate in the invitation-only pilot. They must be delinquent on their loans at least 60 days, have already gone through other foreclosure prevention options, and have enough revenue to cover a rent payment.
Bank of America will assume ownership of the home, and the homeowner's debt will be extinguished. The rent payment will be less than the mortgage payment was, and renters can stay in the home for up to three years. Property management companies will oversee the rental properties.
If the pilot succeeds, the Charlotte bank will explore broadening it.
Bank of America confirmed to the Observer last month that it was exploring such a program. Mortgage industry analysts said the plan was ambitious and doubted that such a program could expand nationwide.