Last week, Bank of America launched an invitation-only “deed-in-lieu” pilot program. This program will permit struggling homeowners to convey the deed to their property to Bank of America in exchange for a lease to remain in their home. Homeowners would be permitted to rent their home from Bank of America for a lower monthly payment than they were previously paying on their mortgage.

According to the Wall Street Journal, homeowners could rent the property for 1 year and would have the option to renew the lease for each of the next 2 years for a price at or below the currently market rate.

It is unclear how many homeowners will take advantage of this program and the extent of the associated administrative costs relative to the costs of mortgage modifications and foreclosures. This is why Bank of America has offered only approximately 1,000 homeowners this deed-in-lieu option.

In order to qualify for this program, owners must be at least 2 months behind on their mortgage payments and must be at risk of foreclosure. The program will not apply to second mortgages and Bank of America is not currently accepting applications.

By Dominic J. Hamilton, Esq.

Associate Attorney, Topkins & Bevans