NEW YORK -- Bank of America says it has begun a pilot program offering some of its mortgage customers who are facing foreclosure a chance to stay in their homes by becoming renters instead of owners.
The "Mortgage to Lease" program, which was launched this week, will be available to fewer than 1,000 BofA customers selected by the bank in test markets in Arizona, Nevada and New York.
Participants will transfer their home's title to the bank, which will then forgive the outstanding mortgage debt. In exchange, they will be able to lease their home for up to three years at or below the rental market rate. The rent will be less than the participants' current mortgage payments and customers will not have to pay property taxes or homeowners insurance, the bank said.
"This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support," Ron Sturzenegger, legacy asset servicing executive of Bank of America, said in a statement.
Among requirements to qualify for the program, homeowners must have a BofA loan, be behind at least 60 days on payments and be "underwater," owing more on their mortgages than their homes are worth.
The bank based in Charlotte, N.C., said it will at first own the homes, then sell them to investors. If the program is successful, it could be expanded to include real-estate investors who buy qualifying properties and keep the occupants on as tenants.
"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," Sturzenegger said.
Foreclosure tracking firm RealtyTrac says foreclosure activity has picked up in some states, as banks deal with a backlog of homes with mortgages that had gone unpaid yet remained in limbo due to delays stemming from foreclosure-abuse claims.
Nevada has the nation's highest foreclosure rate as of last month, with one in every 278 households in the state receiving a foreclosure-related filing, twice the national average, according to RealtyTrac. Arizona ranks third behind California, while New York has not been as hard hit, with one in every 4,604 households receiving a foreclosure-related filing.
Copyright 2012 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.
Taking Inventory: Foreclosure Finds Across the U.S.
Bank of America Launches 'Mortgage to Lease Program'
Location: Trenton, N.J.
Average Foreclosure Discount: 67.8 percent
Sq. Ft.: N/A
Trenton ranks No. 1 on RealtyTrac's list of cities with the steepest foreclosure discounts. This single-family, whose price was slashed recently, represents one of the killer deals you can find in the city.
Dating back to the 1960s, this Cape Cod-style home offers three bedrooms and two baths. Judging by the average foreclosure discount of New Jersey, the home could be running as much as $150,000 below market value.
Average Foreclosure Discount: 49.67 percent
Price: $3.75 million
Sq. Ft.: 22,000
Foreclosed homes in Atlanta are selling for a staggering 50 percent off, according to data from RealtyTrac. This vacant Mediterranean mansion offers a rather excessive four kitchens along with amenities that include a home theater, pool, spa, steam room and elevator.
Average Foreclosure Discount: 48.14 percent
Price: $4.29 million
Sq. Ft.: 12,129
It may be hard to believe that $4.29 million is a below-market price, but given that this stucco Mediterranean is bank-owned and Houston's foreclosure discount approaches 50 percent, odds are that the home could be quite a deal for a well-heeled buyer.
Location: St. Louis
Average Foreclosure Discount: 54.61 percent
Sq. Ft.: 1,342
This brick-built home, which dates back to 1930, probably hit the market at a reduced price to begin with, but now is running even lower, having just undergone a price cut. The home offers stained-glass windows and wood flooring along with a spruced-up kitchen.
Pictured here is the home's updated kitchen. The residence is even more of a deal if you factor in its purported HomePath Mortgage status. That means if you've got the right credit, you could snatch it for as little as 3 percent down.
Location: Lansing, Mich.
Average Foreclosure Discount: 44.31 percent
Sq. Ft.: 2,228
Squeezed into a condo community, this historic home stands out in the neighborhood because of its stately portico. The home has a long residential tradition, but could go commercial if the buyer so chooses: The house can serve as an office, according to the listing.
Location: Grand Rapids, Mich.
Average Foreclosure Discount: 43.45 percent
Sq. Ft.: 4,339
You get a lot of bang for your buck if you buy this four-bedroom contemporary. Located on a cul-de-sac, the home spans a generous 4,339 feet and offers a three-car garage. At under $300,000, that makes it an affordable luxury residence.
Location: Flint, Mich.
Average Foreclosure Discount: 21.55 percent
Sq. Ft.: N/A
Purchase a foreclosed home in Flint and you're likely to enjoy the benefit of more than 20 percent off. While the city's foreclosure inventory doesn't offer deals quite as striking as those found in some other cities wracked by the housing crisis, the town's average foreclosed-home price still falls far, far below the national median (which hovers above $200,000). Flint's average foreclosed-home price is just $60,578. This well-landscaped home demonstrates how far just $110,000 gets you.
Location: Easton, Pa.
Average Foreclosure Discount: 41.17 percent
Sq. Ft.: 1,556
Alright! A listing description that levels with you. "This is a property that needs some work," it states. The home is not without its virtues, however: It offers ample space, three bedrooms and an attic. Furthermore, buyers can acquire 3 percent buyer's assistance if they make an offer by the 31st of this month.
One thing buyers should watch out for if they think about shelling out for these digs is that, as with many other foreclosures, there is no seller disclosure for buyers interested in this home. That means, unless you pay for a thorough inspection, you could discover hidden flaws after purchasing the place.
Pictured here is the home's open dining-kitchen area. The place seems to be in pretty good shape for a foreclosed home. Many fall into poor condition, succumbing to insect infestations or other symptoms of neglect.