Bank of America is starting a pilot program that will allow homeowners at risk of foreclosure to stay in their homes. Essentially, it entails handing over the deed to the house to the bank and signing a lease that will allow them to rent the house back from the bank at a market rate. Borrowers will agree to a “deed in lieu” of foreclosure, which is less costly to the bank and damages the borrower’s credit less than a foreclosure. Former owners will be offered a one year lease with options to renew every two years at or below the current market price.
The initial breadth of the program has been released to 1,000 homeowners in Arizona, Nevada, and New York-and only homeowners who receive letters from the bank can participate. It is unclear yet how widespread the program will become. Some have suggested a deterrent may be the need for the bank to comply fully with the Oregon and Washington landlord-tenant act in becoming a landlord, which includes an obligation to maintain the habitability of the housing unit. Are banks really ready to become landlords? My guess is, not really.
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