Bank of America’s Mortgage to Lease program, which was launched in March 2012 is drawing skepticism. Under the pilot program, a delinquent borrower who is deemed to have enough income to make an affordable rental payment trades his/her property title for a lease agreement—typically up to 3 years—and rent payments that are less than his/her existing mortgage payment.
But Angela Martin, who is a consumer advocate at Economic Fairness Oregon, questions why Bank of America wouldn’t just modify loans for borrowers who the bank determines can pay rent. “It’s unbelievable to me that we continue to feel that banks are going to wake up and be these good community players and do things for altruistic motives,” she says.
Bank of America didn’t respond to our question about why the 1,000 borrowers didn’t qualify for loan modifications, saying only that that option had been “exhausted.”
Bank of America spokesperson Rick Simon says, however, that the bank will report the deals as deed-in-lieu transactions to the credit bureaus.
“This is less damaging to the credit history than a foreclosure and generally will allow the borrower to qualify for another mortgage in less time,” he says. The program, he says, could stabilize housing prices by keeping a portion of distressed properties off the market.
The program, which was limited to Arizona, Nevada and New York, was for borrowers who were delinquent on their mortgages for more than 60 days, couldn’t get a loan modification and faced foreclosure. At press time, no decision had been made about whether to expand the program. No other major bank with which we spoke was planning a similar program.