BofA to offer rentals as foreclosure alternative

[Omaha Steve]

Source: AP-Excite

NEW YORK (AP) - Bank of America says it has begun a pilot program offering some of its mortgage customers who are facing foreclosure a chance to stay in their homes by becoming renters instead of owners.

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.



Read more: http://apnews.excite.com/article/20120323/D9TM4SPO2.html

---

A Bank of America branch is shown in a Charlotte, N.C. file photo from April 20, 2006. Bank of America said Thursday March 22, 2012 it has begun a pilot program offering some of its mortgage customers who are facing foreclosure a chance to stay in their homes by becoming renters instead of owners. (AP Photo/Chuck Burton, File)

[SemperEadem]

1. why should they rent a home they own and have been paying on?

why doesn't BofA just restructure their payments so that they can stay in their home?

That makes more sense... but I guess it's too much like right to do that, huh? (that's a rhetorical question.)

[FarCenter]

12. At least in Arizona, the "owner" with a trust deed mortgage doesn't actually own the home.

How are trust deeds or mortgage liens treated in Arizona?
Arizona primarily operates as a title theory state where the property title remains in trust until payment in full occurs for the underlying loan. Foreclosure is a non-judicial remedy under this theory. The document that secures the title is usually called a deed of trust, but in Arizona, this is also referred to as a trust deed. Arizona law also permits mortgages to serve as liens upon real property and for judicial foreclosures to occur through the courts. Because the power of sale provisions in trust deeds is a faster mechanism to effectuate foreclosure, this is the primary vehicle to foreclose.

http://www.foreclosure.com/statelaw_AZ.html

NV is the same.

NY is a lien theory state, so the borrower actually has the deed, and the lender has a lien on the property.

Mortgage lending law is complex and varies by state. But generally, someone who owes more on a property than the property is worth isn't actually an "owner" for practical purposes.

[SemperEadem]

14. reply #13

[xtraxritical]

18. Because BoA is just about bankrupt and needs assets on their books, now.

[Betty]

2. So instead of rent to own

They are going to turn that on its head. I'm not surprised the assholes at BOA wold come up with something like that.

[sofa king]

3. It's "rent to lose a home."

[dixiegrrrrl]

8. You are correct..the devil is in the details:

"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.

The bank based in Charlotte, N.C., said it will at first own the homes, then sell them to investors. "

The reason they want paying tenants is to make the homes look like income producing investments when they sell the homes to investors.
Look at this other story from Reuters about the scheme:

The Wall Street gold rush in foreclosed homes

"Investors seeking higher yields are drawn to foreclosures because the rental market is red hot. "
http://www.reuters.com/article/2012/03/21/us-usa-foreclosures-investors-idUSBRE82J12M20120321

[Bonhomme Richard]

4. I thought they were doing this in ther UK for years. n/t

[tcaudilllg]

5. Sick-ass monsters.

Destroy this bank. It's the BP of the banking industry -- no good can come of it.

[freshwest]

6. Will give people a chance to get back on their feet and stay in their community while they get ready

To find other housing alternatives for the long term, dependent on their financial condition. Sounds humane and practical. Naturally, this is to stave off Occupy and growing wrath.

It's better than calling the Sheriff to evict. The kids will be able to continue in their schools, etc. The larger question, which mortgage lenders have no say about, is the labor market.

It's been unemployment and stagnant wages that did this, more than any crazy mortgage schemes. There were similiar problems in the eighties with balloon payments, based on the popular meme that people's wages would increase and they'd be able to afford to pay more.

For some, it worked. A wave of failures occured when it didn't happen for others, but the scam was nothing like what we've seen in the last decade. This is good, no matter what the name of the bank is. It should have been offered earlier to maintain neighborhoods and allow people to plan their lives easier.

I say this. because home 'ownership' until the mortgage is paid off, is a scam. It causes people to believe they have permanent homes for 30 years, when it's a gamble that is dependent on many things beyond their control. Their jobs, health, natural disasters, etc. that some cannot recover from. And then they have paid a high price for the myth and status of being homeowners.

In a way, I think that the mortgage industry and this so-called American dream with owning a home, has never been more than glorified renting. Mortgages are slavery. If a person can't afford to buy outright, they are taking a huge risk. And most people can't, so they enter into a risky game with the banks that their lives will follow a great path and it will all work out for the most of the rest of their lifetimes.

For those who win at this game, fine. But I wonder if all of this was set up to buy people off one at a time instead of truly addressing the problem of income equality. That's what I see as the problem, and the home buying industry was just a diversion from what may have been an effective social movement that would have never allowed this to happen.

[Kolesar]

16. Long term mortgages have driving up the price of homes

Homes would not cost as much if all of the buyers could only get five year loans.

I agree w/ your comments, btw

[freshwest]

17. Thanks, I agree with your comment too.

[Trillo]

21. That has also been beneficial to localities pimping

all the latest patented building gizmos and gadgets.

Why don't we see more Cal-Earth moon domes in warm parts of the country like the southwest?

[freshwest]

23. Yes, there has been a lot of barriers to affordable, green housing by local governments that keep

Americans going in debt to live close to their jobs. It's a cycle we need to break because it puts terrible stress in people's lives being in debt. And it's not necessary.

[dixiegrrrrl]

7. Owners need to make BOA prove it owns the homes!

BOA is a servicer, it does not own any mortgages.
The paperwork has been proven to be missing/lost/destroyed,
and the notes have been proved to NOT be in the MBS trusts.

I have, unfortunately, a BOA mortgage.
And until I get a clear title, I figure i am already renting this house
( for admittedly a very low payment)
from the bank...errr...from whoever has the legal note.

[SemperEadem]

13. THIS!!!!

BofA can't even prove that they have the titles to the homes in the first place. They've fought every measure to make them produce the documents saying that they even HAVE a legal say in the issue.

Now, they want homeowners to rent homes for which BofA can't/won't even produce documents of ownership so that it "looks good" to have the homes occupied... and then after 3 years at renting at a rate that will never allow them to catch up on the balance--what? They're evicted and have to go through the cumbersome legal burden of the eviction process?

How about they forgive all of the extraneous taxes and fees and restructure the home's value according with its present day value and take the loss as punishment for acting fraudulently with regards to the titles of the homes?

[FarCenter]

15. The condition of the paperwork depends on how the mortgages were originated

Conventional mortgages lent by BofA branches are likely in very good shape.

Mortgages by Countrywide, not so much.

Mortgages by mortgage brokers, acquired via the wholesale operations of Countrywide and Merrill Lynch and then packaged and securitized are likely problems.

[AlbertCat]

9. is something our customers, the community and investors will support,

IOW.... can we get away with it?

I hate it when you hear from any bank "we did such & such because we want to make it more convenient for YOU...."

No they didn't. No they don't. (and it never is)

[Myrina]

10. Haha HELL NO

Rent, as in, "you have nothing to show for all the money you've paid in to BofA, no 'land owner/property' rights, no tax deductions for upgrades/mortgage interest pd and we can kick you out at any time and re-rent or sell to a higher bidder etc etc" ...

These fucking bankster-crooks need to be brought to their knees.

[jtuck004]

11. Well, thankee, thankee, Mr. Charlie. Now you get the money AND the house.

Don't what we would do without this option to stay on as a sharecropper for the people that destroyed our jobs and lives. I'm so happy you were too wise to allow someone like me, who obviously has some income, to keep the asset. You probably figured I would just screw it up again, even though we weren't the one that failed in our fiduciary responsibility and underwriting standards, pushed fraudulent documents after corrupting the rating companies, or used the money we paid in taxes for schools and health care to underwrite big cash payouts to your employees for screwing over their customers in your pursuit of profit.

Thank you for taking care of me, boss!

[cstanleytech]

19. What this seems like to me that its designed to

rather than help the home owners by redoing the mortgage at a lower rate they figure they might try to sucker people in to take care of the homes until the bank can find a buyer 3 years from now when the markets expected to recover.
This way they dont have to pay as much for them compared to how much they would have to pay if they went through with evicting them not to mention if they evicted them the bank would have to pay someone to maintain the properties with things like lawn care and security plus taxes.

[Trillo]

20. This could be a sign that property values are expected by the banks to appreciate

in value. Basis is that they do nothing unless it is to their financial advantage.

[dipsydoodle]

22. Not necessarily appreciate

By keeping homes occupied it reduces the chances of property values falling further.

[askeptic]

24. If they can pay rent, why don't they qualify for the mortgage modification?

Something fishy here -- They are already being sued for not offering mortgage modifications to thousands who qualified...

[Devil_Fish]

25. If I were one of these underwater home owners, I would tell BofA "No thanks, go ahead and evict me."

and before I was gone, I would sell everything in the house including the kitchen sink. After BofA evicted me, the only thing left in the house would literally be a pot to piss in...... Used.

[Yo_Mama]

26. I'll be the realistic bitch here

First, most of the people to whom this will be offered will be Alt-A borrowers. Many of them will have refinanced and cashed out.

Those are the type of people who often bought homes and NEVER paid net principal during the time they lived there. The home purchases were essentially funded by appreciation, often with a refi cashout in the mid range, at which time the loan was rolled over to an Option-ARM, so that in some cases the "owners" not only didn't pay principal but didn't even pay the interest on the loan.

I feel no sorrow at all for such owners - they were speculating. For the banks, it is a problem, because these types of buying/borrowing patterns occurred in clusters. Now that Alt-A resets are looming, the potential losses are huge and more and more of these borrowers are likely to default if the area degrades and their property values do too.

On this particular forum, the knowledge about mortgages and lending practices in the recent bubble seems scant.

Here's a research paper about the characteristics of these mortgages:
http://research.stlouisfed.org/publications/review/10/01/Sengupta.pdf

For a bank, this can make sense because the transition will usually occured via DIL with low costs to the creditor, and lower costs to the creditor than would otherwise occur after transfer of title.

For the "owner", if the owner liked living there but was never really paying on the house, the owner was speculating, and may well want to stay at a reasonable sum. The speculation may not have worked out, but usually such borrowers did move into a neighborhood they liked.

After the rental period is up, the renter may want to buy the house at a reduced sum with a real mortgage. If the renter has been paying the rent, the renter is usually pretty well-qualified, and the resulting mortgage might be put through as an agency mortgage.

The potential for absolutely huge losses on these types of loans is real. Such a strategy, if successful, might well minimize the eventual losses.

Any creditor would be an absolute fool to rework a funny-money mortgage in which the "owner" was never really paying the mortgage. You'd be much better off foreclosing and flogging the house for whatever you could get. But that is a costly procedure, and since a lot of these loans came into BAC from Countrywide, they are clustered and if enough huge losses are taken, it would cause figuring additional losses for the entire base pool of loans. That's something BAC would like to avoid if it can.