Bank of America (BofA), one of the largest lenders in the US, will be testing a new foreclosure-avoidance programme called ‘mortgage-to-lease’.
BofA will send proposals later this month to nearly 1,000 mortgage customers in New York, Arizona and Nevada. If the result is positive, the company will likely expand the programme to other states and it could become a model for Fannie Mae and Freddie Mac, the biggest players in the US mortgage market.
It noted that the new scheme targets homeowners who were initially offered various alternatives to avoid foreclosure. Customers who use the plan are expected to deed back their houses to the bank in exchange for multiyear lease terms, which is slightly below the current market rent for their homes, provided that they have a monthly income to make the payments.
Though Bofa has not discussed the full details, several homeownership advocates and leaders are positive about the scheme.
“I’m glad to see the (lending) industry moving in this direction and away from their usual foreclosure, you’re gone, goodbye,” said Colleen Hernandez, CEO and President of the Homeownership Preservation Foundation.
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