Foreclosures are messy. As soon as a property goes vacant, the property becomes trashed. Appliances, systems and copper gets stolen, and the home is sometimes used for criminal activity, resulting in declining values for the property and the nieghborhood.
So more and more lenders are looking for ways to work deals with homeowners, rather than go through the process that doesn’t really work out for either the owner or lenders.
Bank of America is testing out an experimental program in Arizona called “Mortgage to Lease” designed to save people from foreclosure and keep them in their home.
Here’s how itworks: BoA is sending letters to select customers (chosen at their discretion) giving them the option to do a “deed in lieu.” This means the homeowner releases the house to the bank, who then rents the home back to the owner at fair market rates. Its intent is to keep the family in their home, avoiding an adversarial legal eviction, and protecting the integrity of the property in the meantime.
If the program works, it could be a win for all sides involved.
It’s not foolproof, and it doesn’t address all potential problems. But in order for our housing market to heal, it requires smart, new ideas to work our way through the backlog of foreclosures.
And though Clark has been accused of excessive optimism on this, he still strongly believes we are bouncing along the bottom and poised for a rebound. This is partially due to the fact that there has been relatively no new contruction in recent years, which should help absorb the excess vacancies and restore the balance of supply and demand.