Bank of America Corp. is launching a pilot program that will allow homeowners at risk of
foreclosure to hand over deeds to their houses and sign leases that will
let them rent the houses back from the bank at a market rate.While
the initial scope of the "Mortgage to Lease" program is small—the bank
began sending letters Thursday offering leases to 1,000 homeowners in
Arizona, Nevada and New York—it represents a big change in the way banks
deal with borrowers who can't afford their mortgages.
Until now, banks have focused the bulk of their borrower outreach on
modifying mortgages, usually by reducing the monthly payments. When that
doesn't work, most foreclosure alternatives require homeowners to leave
their house, typically through a short sale, in which the bank approves
the sale for less than the amount owed. Banks often insert clauses
forbidding the new owner from renting the property back to the former
owner.
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