B of A's Bold Experiment to Avoid Foreclosing

Bank of America announced that they were launching a pilot program to turn defaulted owners homes into rentals…and defaulting owners into tenants. Here are the details.

* Borrowers would agree to a what is known as a “deed-in-lieu” of foreclosure, where they essentially sign over ownership of the property to the lender.

* Former owners would be offered one-year leases with options to renew the leases in each of the following two years at rents that the bank determines are at or below the current market price. * The bank began sending letters Thursday offering leases to 1,000 homeowners in Arizona, Nevada and New York.

* Borrowers would have to demonstrate an ability to pay the market rent. In other words, the former owners would have to apply to lease their homes back from B of

Will it work? If an owner has defaulted due to real honest to God hardship are they even going to qualify to lease their own homes back? Or the other common situation where an owner strategically defaults. Will a strategic defaulter want to complete a credit application with the very same bank they just defaulted on?

* Rents would be based on a BofA formula. For example, a soon to be former owner with a $250,000 mortgage and monthly payments of $1,600 could swap the house for a lease, renting the home for $900. * Borrowers selected for the program must be at least two months past due on their mortgage and face considerable risk of foreclosure.

* Bank of America is reaching out to borrowers who have exhausted other alternatives to foreclosure or who haven’t responded to earlier solicitations.

* Homeowners with second mortgages or other liens won’t be selected. Stay tuned....