A few weeks ago, Bank of America initiated a pilot program allowing homeowners facing foreclosure to remain in their homes as renters. There are important reasons why Santa Barbara homeowners should be interested in the success or failure of BoA’s approach.
First, a note about the term “bank owned homes”. It’s not technically correct to say that there has been some huge rise in the number of them, because “bank owned homes” actually describes every home with a mortgage. The mortgage holder always technically "owns" the property, even when the homeowner retains title. However, what is true is that over the last four years, many homeowners learned the hard way just what it means to face the reality of your home being owned by someone else.
Enter Bank of America. Their press release quotes Ron Sturzenegger, a Legacy Asset Servicing executive with the Bank: "Our priority is designing a solution that helps our customer." Although we might be justifiably skeptical of this as BoA’s sole motive, allowing homeowners to remain as renters in bank owned homes is hardly just a PR move.
The program certainly makes bottom-line financial sense for a whole host of parties, including Santa Barbara homeowners who have no difficulty meeting their own mortgage payments.
Under the program, a former homeowner who qualified would be able to continue working and contributing to the economy without the costs, loss of time, and anxiety involved in moving. For all property owners, the ultimate effect is to keep the market from being flooded with distress sales. Every neighborhood would benefit if home values stabilize.
Under the pilot model, bank owned homes convert to investor ownership in a much smoother transition than the foreclosure/short sale model. Instead of the lender being left with an empty property generating zero revenue in the interim, former homeowners simply become renters, making it easier for them to get back on their feet financially.
In my opinion, any move or policy that helps more people stay in homes is a policy worth discussing. BoA’s program is only in a limited test stage, but here in Santa Barbara we can hope that it will prove to have multiple beneficiaries: banks, investors, agents, homeowners and neighbors. Everyone benefits when his or her neighborhood’s real estate market is healthy!