Yves Smith and David Dayen have good posts on the announcement that Bank of America will pilot a program with 1,000 homeowners in Arizona, Nevada, and New York which would allow people who are at risk of foreclosure to rent their house from the bank for a year, with an option to extend for two years. The upside of this is that it would save the homeowner a large amount of money during that time period. Given that they would have likely lost the home anyway and seen more of their money go out the door with it, along with their credit score, the right to rent could better position homeowners to move on from their underwater homes.
Smith notes some good caveats to this. First, it’s so small, it’s hard to get your hopes up about a widespread solution. Second, the reach of this, even if widely enacted, could be limited if the banks aren’t wiping out their second liens. And as we’ve seen with the massive stock of REOs nationwide, banks aren’t good at upkeep of homes and are likely going to be worse as landlords.
Dayen’s conclusion is sharp:
But if this does work, it would represent the fact that the banks have screwed up so royally, particularly BofA, that the only way out is one that accidentally benefits the homeowner in the process. Hopefully some other banks will join BofA in this effort.