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Bank of America Tests “Mortgage-to-Lease” Program

Let’s say you’re a homeowner and you stopped paying your mortage months ago. You’ve exhausted all your options to avoid foreclosure, and you’re just waiting for your house to be auctioned off before moving on. Then your lender invites you to turn over ownership of your home in exchange for being allowed to continue occupying your home as a tenant for the next three years at a below-market rental rate. On top of that, your mortgage debt would be forgiven and the foreclosure would be cancelled. What would you do?

Bank of America is hoping most homeowners would say “yes” to the offer, as it begins testing its new Mortgage-to-Lease program this month. While B of A is handpicking a group of about 1,000 borrowers in New York, Nevada, and Arizona for its pilot program, if successful the program could be offered to a broader set of homeowners (and serve as a blueprint for similar programs offered by other lenders, including Fannie Mae and Freddie Mac). Those eligible for the pilot program include homeowners whose mortgages are owned by B of A (this excludes the 9 million mortgages serviced by B of A but owned by outside investors), whose mortgages have been delinquent for at least two months, who live in their homes, who don’t have second mortgages or home equity lines of credit, and who have either exhausted all other foreclosure alternatives (such as loan modification, short sale, or deed in lieu of foreclosure) or ignored offers to apply for such alternatives. B of A would initially retain ownership of the leased homes, then later sell them to investors.

The benefits to distressed homeowners are many: They would avoid the black mark of a foreclosure on their credit history. They wouldn’t have to convince a landlord that they would be responsible renters despite their low credit rating. For homeowners living in one of the many states that allow lenders to sue borrowers to recover a deficiency (the difference between the outstanding mortgage debt and the foreclosure sale price) after foreclosure, they wouldn’t have to worry about still owing money to their lenders after foreclosure. And they would be able to stay in their homes without the worry of the sheriff knocking on their door at any time.

Despite these benefits, some critics think participation by homeowners in the program will be low. With foreclosures languishing for years in some cases, homeowners may decide to simply stay put in their homes for free, building up a nice nest egg in the meantime. Only time will tell whether these mortgage-to-lease programs will help to solve our current mortgage crisis or simply be another boondoggle.

Nolo Mourns the Loss of Steve Elias

I am sad to report that last Thursday Steve Elias unexpectedly passed away.  Steve truly embodied the “soul of Nolo” — always striving  to get excellent legal information to people at low or no cost. From his award-winning self-help bankruptcy books to his own legal practice, he helped countless people struggling with debt and other legal issues.  When it came to helping people access the legal system, Steve always said “yes.”  Put his books up for free on our website?  Sure.  Write countless free legal articles and blog posts on bankruptcy and foreclosure issues?  Of course. Answer customer questions about information in his books? Always.

I was so lucky to work with him over the past decade, and particularly in the last few years.  Steve was generous, kind, enthusiastic, and modest — not to mention whip-smart and incredibly knowledgeable about bankruptcy and so many other things. I will truly miss him as will everyone who knew him.

For more about Steve’s contributions to self-help law and his local community, read Mary Randolph’s post on Nolo’s corporate blog and the obituary in the Lake County News.




DOJ Won’t Oppose Joint Bankruptcy Petitions by Same-Sex Couples

The latest news in the bankruptcy arena for same-sex couples continues to be good. The U.S. Department of Justice announced on July 6, 2011 that it will no longer oppose joint bankruptcies filed by same-sex couples legally married in their state. This news comes close on the tails of the recent bankruptcy court decision in Los Angeles where 20 of 24 judges signed an opinion allowing a same-sex couple to file a joint petition for bankruptcy. That opinion declared that the federal Defense of Marriage Act was unconstitutional.