Bank of America is testing a new way to deal with defaulted home loans: instead of foreclosing, they'll take the deed to your home and rent it back to you.
What's the difference between that and foreclosure? Lower costs for the bank, and less disruption in homeowners' lives. In addition, fewer empty foreclosed homes in the neighborhood could help housing markets, and renters should end up paying a bit less than they were spending on mortgage payments.
It's not clear how well this strategy will work, but you have to give them credit for trying something different. Apparently there are investors out there who want to take homes off the banks' hands, and this approach would streamline the process. I've heard that actually managing the properties will be a challenge -- managing 100 single-family homes is a lot different from managing 100 apartment units -- but the investors seem willing to move forward.
What do you think about this approach? As a homeowner would you enjoy the ability to stay in your home, or would it leave a bad taste in your mouth?
Further reading:
- Private Student Loans: Overview
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