Bank of America Begins Small Rent-in-Lieu of Foreclosure Experiment

BofA is currently receiving a substantial amount of press for a very small pilot program that promises to rent homeowners’ homes back to them instead of foreclosing on the homes. However, the program requires homeowners to be at least two months behind in their mortgage payments to qualify for the program, and fewer than 1000 slots are available in a few select markets. Another ploy to encourage struggling homeowners to default? Maybe. More from the L.A. Times:

The "Mortgage to Lease" program, which was launched this week, will be available to fewer than 1,000 BofA customers selected by the bank in test markets in Arizona, Nevada and New York.

Participants will transfer their home's title to the bank, which will then forgive the outstanding mortgage debt. In exchange, they will be able to lease their home for up to three years at or below the rental market rate. The rent will be less than the participants' current mortgage payments and customers will not have to pay property taxes or homeowners insurance, the bank said.

"This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support," Ron Sturzenegger, legacy asset servicing executive of Bank of America, said in a statement.

Among requirements to qualify for the program, homeowners must have a BofA loan, be behind at least 60 days on payments and be "underwater," owing more on their mortgages than their homes are worth.

The bank based in Charlotte, N.C., said it will at first own the homes, then sell them to investors. If the program is successful, it could be expanded to include real-estate investors who buy qualifying properties and keep the occupants on as tenants.