Bank of America recently proposed a pilot program to convert homes in or near foreclosure into rental property. The bank's test program applies to 1,000 homes in Arizona, Nevada and New York that will potentially be sold to investors as rental properties. Consumer advocates say the program is beneficial because it keeps troubled homeowners in their homes as renters rather than allowing them to be kicked out. If the program is successful in Arizona, it will be expanded to California and eventually to all 50 states.
Under the Bank of America pilot program, the bank will take possession of homes formerly owned by distressed homeowners after foreclosureor a direct sale to the bank, and will then rent the homes to the former owners. Within about three months, the bank will sell the home to an investment group in order to step away from the business of managing property for the long-term.
Consumer advocates say the rental program will not only benefit distressed homeowners, but also communities. Banks that seize and sell unoccupied houses tend to contribute to empty housing stock and neighborhood blight, which has a negative effect on area property values.
However, the Bank of America program is not completely altruistic. The bank plans to bet in favor of recovering housing markets when it sells the homes to investment groups. The bank also wants to determine whether selling houses to an investment group at a large discount is a better deal than the costly and drawn out process of foreclosure. If the trial program pans out financially, it will likely be expanded.
Unfortunately, Bank of America chooses which homeowners will participate in the program. Homeowners themselves do not get to apply for the program. The pilot program is limited to 1,000 homes whose owners are at least 60 days late on mortgage payments, and who do not qualify for or are unwilling to accept alternatives to foreclosure.
Fannie Mae and Freddie Mac may follow a similar strategy and hope to sell almost 250,000 foreclosed homes to investors.
If you face foreclosure in Arizona, contact an experienced foreclosure attorney to discuss your legal options.