Bank Of America Deal Would Turn Owners To Renters

Bank of America is reaching out to some distressed homeowners with a deal. They can stay in their homes, but as tenants. They would need to turn over the deed to the bank. Bank of America says it will help avoid foreclosures, but housing advocates don't like the plan.

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Some news today for struggling homeowners. Bank of America has announced a plan to turn them into renters in their own houses. The bank says the pilot program will help homeowners avoid foreclosure.

Critics say the bank is missing the point, as NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: Certainly if there is really no other way to avoid a foreclosure, becoming a renter in the same house might be attractive. That's how Bank of America executive Ron Sturzenegger explained it earlier today. He said the effort is starting small; the bank is reaching out to about 1000 homeowners.

RON STURZENEGGER: The reason we've identified these thousand is because they're 90 days behind on their current mortgage. They are in the foreclosure process already, so they generally know the direction they're heading. And we're trying to contact them and say would you like to avoid foreclosure by becoming a tenant.

ARNOLD: Sturzenegger was speaking to CNBC to announce the new effort. But critics say that these homeowners are exactly the kind of people who the banks should be working out loan modifications for, so that they can stay in their houses as owners.

BRUCE MARKS: And if they are paying rent, that rent should be a mortgage payment.

ARNOLD: Bruce Marks heads up the Neighborhood Assistance Corporation of America.

MARKS: Therefore, the banks need to modify the mortgages to keep them as homeowners and not to set up this program that will benefit investors and make these homeowners into renters.

ARNOLD: The bank says that it's only offering this program to people who don't qualify for loan modifications, or who haven't been responsive to that. But lawyer Gary Klein is skeptical. He is suing Bank of America for wrongfully rejecting thousands of homeowners who, he says, should have qualified for a federal program to modify their loans and keep them in their houses.

GARY KLEIN: This is a company that has failed working with homeowners to help them lower their mortgage payments.

ARNOLD: Bill Wheaton, an economist at MIT, has said that the program probably reflects a growing demand for rental properties from investors. He would like to see the bank create a good rent-to-buy option for the homeowners as part of the program.

Chris Arnold, NPR News.

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