Bank of America Pilot Program – An idea that was in place during the Great Depression is being trial run by Bank of America. The pilot program offers a possible option for people facing foreclosure to stay in their homes.
Bank of America Pilot Program
The premise is simple. People on the verge of foreclosure are offered the option to give their home to the bank and then stay on as renters. In return for this exchange all of their mortgage debt is forgiven and obviously the bank get to avoid going through the entire foreclosure process, which can often take around 2 years and cost close to $80k.
According to an article on RepublicanAmerican:
“Bank of America says it’s targeting homeowners who are at “considerable risk” of foreclosure; have high loan balances relative to their home’s value; have exhausted all loan modification programs, and have been delinquent on their mortgage payments for more than 60 days.”
The pilot program called “Mortgage to Lease” is currently enrolling trial members from Arizona, Nevada and New York. Less than 1000 will currently be enrolled. They are allowing people who have exhausted other loan modification options.
After a period of time the homes could potentially be sold onto investors. I assume the rental agreement would stand for some time afterwards but I don’t know the full details of that!
On one hand I can see some potential benefits for both parties in such a program. Obviously a person / family would not be made to immediately move out and the stress of foreclosure would not be an issue. The local area and community would also not be seeing the effects and drag a foreclosure can bring on a local housing market.
Of course the person will still lose their home and all the money they have spent on the mortgage up until now. This is obviously soul shattering for a family and these programs don’t solve the whole problem. If some kind of middle ground could be found where both parties keep share the value of the home, maybe just part selling back to the bank, who can then sell the portion onto an investor, then maybe that could provide a more favorable situation.
What do you think about this new program? Do you see potential for people facing foreclosure or is this all for the banks benefit?
I’m looking forward to your thoughts.
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