Bank of America Outlines Limited Pilot Test of Mortgage to LeaseTM Program

Preselected Customers May Turn Over Deed, Eliminate Mortgage Obligation, but Remain in Their Homes as Renters

Bank of America Press Release 

CALABASAS, Calif. – Beginning this week in targeted hard-hit markets, Bank of America will offer a limited number of mortgage customers who are facing foreclosure an opportunity to remain in their homes, but transition to tenant status, through a pilot program called “Mortgage to Lease.”

“When homeowners are struggling to make payments, owe more on their mortgage than their home is worth and face certain foreclosure, one of their greatest anxieties is the transition process they face in moving from their home,” noted Ron Sturzenegger, Legacy Asset Servicing executive of Bank of America. “This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support. This program may have the potential to further round out the broad set of solutions we offer our customers in need of assistance.”

To maintain test controls, the Mortgage to Lease pilot will be conducted strictly on a solicitation basis; there will not be any opportunity for customers to volunteer or apply for consideration. Fewer than 1,000 customers will be invited to participate in the first phase of the pilot. Initial outreach has begun to preselected customers in test markets in Arizona, Nevada and New York, three states hit hard in the housing downturn. The pilot population will include customers who meet all of these requirements:

·          Have loans owned by Bank of America.

·          Are delinquent for more than 60 days.

·          Have exhausted modification solutions or have not responded to alternatives to foreclosure, including short sale and deed-in-lieu.

·          Have high loan balances in relation to their current property value.

·          Face considerable risk of ultimate foreclosure.

·          Have no junior liens.

·          Are still occupying the home.

·          Have adequate income to make an affordable rent payment.

Pilot participants will transfer title to their properties to the bank and have their outstanding mortgage debt forgiven. In exchange, they may lease their home for up to three years at or below the current market rental rate. The rental payment will be less than the existing mortgage payment, and the customer will be relieved from certain other homeowner financial obligations, including property taxes and hazard insurance.

Initially, Bank of America will retain ownership of the properties, working with property management companies to oversee the rental properties. Properties in the pilot program will be transitioned to investor ownership. If the Mortgage to Lease program proves viable, it may lead to a broader program, potentially involving selected real estate investors who would purchase properties that meet their predetermined specifications and keep the previous homeowners in place as tenants.

“Our priority is designing a solution that helps our customer,” said Sturzenegger. “If this evolves from a pilot into a more broadly based program, we also see potential benefits from helping to stabilize housing prices in the surrounding community and curtail neighborhood blight by keeping a portion of distressed properties off the market.”

Mortgage Settlement Could Lead to More Scams

Daily Real Estate News | Friday, March 16, 2012

The recent announcement of the $25 million mortgage settlement between five major banks and state and federal government officials was probably welcome news to many people in the real estate business. But it has at least one downside: It will probably cause a rise in scams targeting borrowers seeking assistance.

Currently, between $4 billion and $6 billion is lost each year due to borrower-assistance swindles, says Joanne Kerstetter, vice president of education and community relations for Money Management International, a credit counseling service based in Sugar Land, Texas. Those numbers could go up over the next few years as scammers take advantage of the mortgage deal in their schemes.

“They’ll use government terms,” Kerstetter says. “They’re going to sound very official, as if they’re part of the settlement.”

Also, some of these scammers will guarantee access to borrower assistance funds. That’s a major red flag, she says. “Generally speaking, the advertisements that say, ‘Call us to get money,’ are not representing organizations officially involved with the settlement,” Kerstetter says.

In general, consumers should be wary of any company that reaches out to them with unsolicited offers of assistance. If they need help, they should contact their lenders or a financial counseling agency certified by HUD, Kerstetter says.

“The important thing is not to release any contact information to anyone who approaches you,” she explains. “Don’t sign anything unless you’re clear about what you’re signing and that your mortgage lender is involved in the process. If you’re making payments, make sure they’re going to the loan servicer or mortgage provider.”

 By Brian Summerfield, REALTOR® Magazine

More Details Emerge in $25B Mortgage Deal

Daily Real Estate News | Tuesday, March 13, 2012 

 

The government vows to closely monitor that the nation’s five largest banks fulfill the aid to home owners outlined in a $25 billion mortgage settlement over foreclosure allegations.

More details emerged in court filings on Monday of the landmark settlement among the nation’s five largest banks and state and federal government officials. The settlement, first announced last month, stems from allegations over banks’ foreclosure practices, although as part of the settlement the banks do not have to admit to any wrongdoing.

Among some of the aid outlined in the $25 billion settlement for home owners:

• Banks have agreed to pay about $20 billion to help home owners avoid foreclosure. The majority of that money will be allocated to reducing the mortgage principal and modifying loans for about 1 million underwater home owners. 
• Banks have agreed to pay $5 billion to federal and state government officials, with a portion of that money going to compensate about 750,000 Americans who have been found to be wrongfully foreclosed upon from 2008 through 2011. Affected home owners will receive $2,000 checks. 
• Banks will be required to adopt new processing standards for foreclosure. For example, banks will be unable to pursue a foreclosure when home owners are being considered for a loan modification. 
• Banks must comply with the terms of the settlement or face stiff penalties. Banks are required to complete all loan relief requirements as part of the settlement within three years; 75 percent of it is to be fulfilled within two years. Any bank that violates the agreement will be fined $1 million for each violation, capped at $5 million for repeat violations. 
• The settlement does not free banks from criminal action. Federal and state officials can still pursue criminal action action against banks for any wrongdoing over foreclosures. 

The mortgage settlement only applies to mortgages held privately. It does not apply to mortgages held by Fannie Mae and Freddie Mac.

The banks part of the settlement are Bank of America, Citigroup, JPMorgan, Chase, Wells Fargo, and Ally Financial.

Some banks have negotiated separate requirements so they won’t have to pay as much in penalties to federal and state officials. For example, in return to a reduction in penalties, Ally Financial has agreed to cut the mortgage principal for struggling home owners by 105 percent of the home’s value. Bank of America says it will trim the mortgage principal of more than 200,000 struggling borrowers.

The settlement still must be approved by a judge to be final.

Source: “Feds Promise Tough Oversight in Mortgage Deal,” Reuters (March 12, 2012) and “Gov’t Files $25B Mortgage Settlement; Banks to Provide Relief Without Admitting Wrongdoing,” Associated Press (March 12, 2012)

BofA to Reduce Mortgages of Some Underwater Borrowers

Daily Real Estate News | Monday, March 12, 2012 

Bank of America announced that it will trim up to $100,000 off the mortgage principal of about 200,000 home owners. The bank’s principal reductions are part of the $26 billion foreclosure settlement between five major banks and state and federal officials.

Borrowers who are eligible must be 60 days or more overdue on their mortgage as well as underwater — owe more on their home than it’s currently worth. Mortgages also must be owned by Bank of America or serviced by the bank’s private investors; mortgages owned by Fannie Mannie, Freddie Mac, the Federal Housing Administration and the Veterans' Administration will not be eligible for the principal reductions. 

Bank of America last week also announced a temporary moratorium on foreclosure sales of homes that are covered under the settlement. 

Bank of America is the second largest mortgage service carrier, behind Wells Fargo. 

Source: “Bank of America Reaches Deal on Housing,” The New York Times (March 8, 2012)