Tag Archives: rental prices

BofA Tests an Option to Foreclosure

Bank of America Corp.is launching a pilot program that will allow homeowners at risk of foreclosure to hand over deeds to their houses and sign leases that will let them rent the houses back from the bank at a market rate.

While the initial scope of the “Mortgage to Lease” program is small—the bank began sending letters Thursday offering leases to 1,000 homeowners in Arizona, Nevada and New York—it represents a big change in the way banks deal with borrowers who can’t afford their mortgages.

Until now, banks have focused the bulk of their borrower outreach on modifying mortgages, usually by reducing the monthly payments. When that doesn’t work, most foreclosure alternatives require homeowners to leave their house, typically through a short sale, in which the bank approves the sale for less than the amount owed. Banks often insert clauses forbidding the new owner from renting the property back to the former owner.

The new approach is unlikely to be expanded unless banks conclude that avoiding eviction reduces costs associated with taking back, maintaining and reselling properties. If a significant number of borrowers are willing and able to rent the homes, Bank of America could ultimately sell the properties to investors that agree to keep them as rentals.

Already, in a growing number of housing markets, investors are buying foreclosures and converting them into rentals, often filling them with families that have gone through foreclosure.

Executives last year began to ask themselves “isn’t there a way to sort of combine that whole process and

keep the borrower in the property? It’s just better for the market,” said Ron Sturzenegger, the Bank of America executive who last summer was put in charge of the unit that handles troubled mortgages.

[BANKRENT]

Bank of America became the nation’s largest mortgage originator after its 2008 purchase of Countrywide Financial Corp., but over the past year it has retreated from the mortgage market. The initial pilot is limited to loans that Bank of America holds on its books. Homeowners can’t apply for the program—only those who receive letters from the bank can participate.

Borrowers would agree to a what is known as a “deed-in-lieu” of foreclosure, where they essentially sign over ownership of the property to the lender. This is less costly to the bank and also does less damage to a borrower’s credit than a foreclosure.

Borrowers selected for the program must be at least two months past due on their mortgage and face considerable risk of foreclosure.

In exchange…

Read the rest of this article by the Wall Street Journal here: “Alternative to Foreclosure Tested“.

Americans More Optimistic About Housing, Economy

Americans’ concerns over housing and the economy are subsiding, according to Fannie Mae’s National Housing Survey from February.

An improving job market is a big part of what’s behind Americans feeling more confident about the housing market and the direction of the economy, according to the survey.

“The pickup in the pace of hiring over the past few months has helped soothe consumer concerns, lifting their moods regarding their personal finances, the direction of the economy, and their views on the housing market,” says Doug Duncan, chief economist of Fannie Mae. “As a result, we’ve seen more potential for economic upside, creating a more balanced near-term outlook.”

The survey found that 28 percent of Americans expect home prices to increase over the next 12 months while 53 percent say prices will likely stay the same. Fifteen percent say they expect home prices to decline.

Meanwhile, the majority of those surveyed see rental prices continuing to increase over the next year.

Sixty-five percent of those surveyed say that if they were going to move they’d buy their next home; 29 percent say they would rent.

With low mortgage rates and falling home prices, 70 percent of those surveyed say now is a good time to purchase a home. Also, more Americans surveyed say now is a good time to sell, rising to 13 percent in February, which is the highest level in more than a year but still low by historic standards.

Overall, Americans expressed more confidence about their personal financial situation, with only 12 percent saying they expected their personal financial situation to worsen in the next 12 months — which is the lowest number in more than a year.

Source: Fannie Mae 

This article is by RealtorMag.org