Avoiding foreclosure by renting your home

Bank of America has started a pilot program in which they offer selected mortgage holders in danger of foreclosure the chance to turn over their deed, erase their debt, and get a one-year lease on their home.  The example they gave was a house in Phoenix with a $250,000 mortgage and a $1,600 monthly payment (which the owners could not afford).  The owners turned the deed over to BofA and got a one-year lease for $900 a month (which they could afford).  They also get an option to renew the lease for two more years.

Fannie Mae and Freddie Mac have similar programs, but there is one major catch to all of them:  You cannot have a second mortgage on the home.   If you have a line of credit or a Home Equity Loan, unless you can talk the mortgage holder into giving up that mortgage, no one will make the deal.

The big advantage of these programs is that they let you stay in your home, but another good thing is that handing over the deed in a situation like this will hurt your credit less than a foreclosure would.

The BofA program is a pilot program and they will let you know if you are eligible to participate, but if your home mortgage is held by Fannie or Freddie, you can apply for their “Deed for Lease” program.

You must live in the home as your primary residence, not qualify for mortgage modification, and be released from any second mortgages.  You can check to see if your mortgage is held by Fannie or Freddie at the Making Home Affordable site set up by the Federal Government.

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