Is BofA 'Mortgage to Lease' program too good to be true? What you need to knowPosted: Updated:
PHOENIX -- Bank of America last month started offering some homeowners in danger of foreclosure the option of signing their houses over the bank and then renting them back for up to three years.
Participants in the pilot "Mortgage to Lease" program, which is only available to 1,000 "preselected customers" in Arizona, Nevada and New York right now, will transfer their home's title to the bank, which will then forgive the outstanding mortgage debt.
"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 when program launched in late March.
Among requirements to qualify for the program, homeowners must have a BofA loan, be behind at least 60 days on payments and be "underwater," owing more on their mortgages than their homes are worth.
While the BofA program might sound good in theory, some Realtors say this is an unfair practice and could actually hurt the market's fragile turn around.
Phoenix real estate expert Marge Peck explained it to 3TV's Kaley O'Kelley.
"I think what we missed here is we said we're going to give the deed back to the bank, and nobody is saying out loud, 'It's a foreclosure,'" Peck said.
Peck went on to explain that people who are desperate to save their homes might miss important details.
"You miss the details. The bank will give you a foreclosure and then they'll rent it back to you for three years," she said. "What I don't understand and I struggle with is why won't the bank let you sell it as a short sale to an investor that will also rent it back to you? The banks won't allow that. That's mortgage fraud." The situation has Peck frustrated and angry.
"I'd like us all to be able to play by the same rules," she said. "Are the banks now in the business of real estate where they're going to be doing property management and holding the assets? … I'm very, very concerned about the word 'monopoly.'"
Peck also believes banks renting foreclosed home to former homeowners might hurt the market because "they're going to control the inventory."
"They're not doing what they should be doing -- disposing of the properties to homeowners and investors," she said.
Peck said she would love to see one of BofA's test cases.
"Two weeks ago, Bank of America announced this program I haven't seen one homeowner on the news that's gotten the paperwork," she said. "You would think that somebody would talk about it and less we see the paperwork and what's involved."
As part of the program, participants can rent their homes for three years, but it's not clear what happens at the end of that time.
"I think it's time to say goodbye and the bank will sell it, and it's appreciated and they gain the extra profit that could have belonged to somebody who should be a homeowner," Peck said.
For information on the foreclosure rental agreement, visit www.ThePeckTeam.com or call 480-CHOICES.