On March 22, Bank of America announced a launch of a program that gives homeowners “who are facing foreclosure an opportunity to remain in their homes, but transition to tenant status,” said a news release put out by the bank. The new program, in limited release right now, is called “Mortgage to Lease.”
There is no opportunity for a homeowner to sign up for the program; it’s a pilot program being offered to less than 1,000 homeowners in Arizona, New York, and Nevada.
The release goes on to say, “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.”
It was the paragraph above that made me wonder what this could mean for contractors of all kinds, particularly if this program is greatly expanded. Will it mean an easier or more difficult time trying to get equipment installation, service, and/or maintenance approved and paid for? Will the property management companies, and later the real estate investors, be less willing to install new equipment than the previous homeowners-turned-renters would have been? If very many homes in which a contractor used to perform work become the property of the bank, then real estate investors, does that mean a change in any aspect of a contractor’s business, such as to whom and how marketing is done? And if a contractor has a service contract that lasts an entire year with a homeowner and suddenly that homeowner is a renter in that home, what does that mean for the service agreement and the contractor?
I don’t pretend to have any answers to these or any other questions that may come to mind concerning this topic, though I did want to bring it to readers’ attention. Perhaps some of you reading this blog have already dealt with other difficult situations caused by the housing meltdown, such as where the homeowner is no longer in the home due to a foreclosure situation, etc. Please share your experiences in the comments below.
