Unable to qualify for modifications on Bank of America mortgages, a few of California's most distressed homeowners are being offered one last chance to stay in their homes: Become renters instead.
Testing a mortgage-to-lease program in the Golden State, Bank of America Corp. sent 300 letters this week inviting borrowers without other options to apply. An additional 1,500 letters will go out in the next few weeks as the bank -- which also is testing the program in three other states -- evaluates whether a national rollout is feasible.
For The Record
Los Angeles Times Wednesday, May 30, 2012 Home Edition Main News Part A Page 4 News Desk 2 inches; 61 words Type of Material: Correction
Home rental program: An article in the May 26 Business section about a Bank of America program that allows some property owners to rent their homes rather than be evicted through foreclosure said a Fannie Mae "deed-for-lease" program enables occupants of foreclosed homes to remain as renters. The program allows distressed homeowners to become renters before their homes are foreclosed upon.
Bank of America plans to sell the homes to investors. It typically would recoup far less than what's owed but would come out far ahead compared with where it would be after evicting borrowers, making "cash for keys" payments to help them move and selling empty and often vandalized foreclosures in the troubled housing market.
Evicted homeowners tend to look for single-family homes to rent in their own neighborhoods anyhow, so why not let them exchange the deed to the home for a lease, BofA executive Ron D. Sturzenegger said.
"It's good for us, it's good for the borrower and ultimately good for the community," said Sturzenegger, who oversees 50,000 employees handling workouts and foreclosures on troubled loans.
Borrower advocates say the approach, providing a cushion for homeowners at the end of their rope, is long overdue. They point out that mortgage giant Fannie Mae has had a similar "deed-for-lease" program for 21/2 years for the occupants of foreclosed homes it owns.
Some investors already have been pursuing similar goals, such as the partnership that acquired Eduardo and Juanita Quezada's home in Moreno Valley.
The Quezadas' financial setbacks began in 2005, when they refinanced the home after a strike at the supermarket chain where they worked. The walkout wiped out their savings.
Bank of America, which serviced their loan, began foreclosure proceedings in October 2010 after the couple fell behind on payments. Lengthy efforts to qualify for a loan modification were denied, the couple said, because their household income fell short of their monthly expenses by $90.
TwinRock Partners of Newport Beach bought the three-bedroom, two-bathroom home at a foreclosure sale last year and worked out a deal to rent it to them for $1,310 a month, about $40 less than their old mortgage. Staying in place helped them at the time, but has been a difficult experience, Eduardo Quezada said.
"We both have jobs, me and my wife. I thought for sure we would work it out some way," he said. "I had invested a lot in the house, and to walk away from it was depressing."
The Quezadas, who started with a one-year lease and have signed on for an additional six months, are thinking of downsizing to an apartment in a better school district.