Bank of America New Plan for Foreclosing Homes

The Wall Street Journal reported that BofA is initially offering in New York, Arizona and Nevada homeowners who are having difficulty making mortgage payments, to lease their home back to them, at market rates, in exchange for transferring the deed to the bank using a ‘deed-in-lieu of foreclosure.’

This could be a win for the banks, who usually receive no payments during the foreclosure process which can take from 6 to 18 months for the legal process to complete. Often this period of time is even longer when you consider homeowners apply and re-apply for loan modifications, and the homes don’t even go into this long foreclosure process until all modification options have been exhausted. There are even instances of the banks being slow to start the foreclosure process and homeowners are able to live rent-free for many years, before the process ends in a sheriff sale when the homeowner has to find a new place to live. Banks choosing to offer this program at least get cash flow, and a homeowner that will probably maintain the property better than when it goes vacant for many months. Unoccupied homes lose value through vacancy entropy; leaks don’t get noticed for example, copper plumbing, air conditioners and appliances are often stolen.

This is a win for the homeowner too, who wants to stay in a house or condo instead of renting an apartment, pay rent that is affordable, don’t want to move out of their children’s school district until they graduate to the next level.