Bank of America's pilot program would let families facing foreclosure rent their homes.
NEW YORK (CNNMoney) -- 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. (Buying is cheaper than renting)
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.
While Bank of America (Fortune 500) will retain ownership of the properties at first, homes in the pilot program will be transitioned to investor ownership. The bank will work with property management companies to oversee the rental properties.,
"Our priority is designing a solution that helps our customer," said Ron Sturzenegger, an executive with the bank, in a statement. "If this evolves from a pilot into a more broadly based program, we also see potential benefits from helping to stabilize housing prices in the surrounding community and curtail neighborhood blight by keeping a portion of distressed properties off the market."
Bank of America is one of five major banks to participate in a $26 billion foreclosure deal with federal authorities and state attorneys general to settle charges over improper foreclosure actions.
The deal is supposed to lead to billions of dollars in principal reductions and refinancing for more than a million homeowners who owe more than their homes are worth. But critics of the deal say a growing number of borrowers are realizing that the deal will do little, if anything, to help them.
There are nearly 200,000 homes in Arizona, Nevada and New York for which the homeowner is 60 days or more delinquent on their home loans, according to figures from the Mortgage Bankers Association. That figure includes all lenders, not just Bank of America. It does not include homes in those states that are already in the foreclosure process.
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