Will the Bank of America Program Cure the Housing Hangover?

The banks and the government are putting together programs in full force to cure the housing hangover that still lingers from 2005.

So here is yet another way to ease the burden of the 800 lb gorilla known as 3 million fatally delinquent mortgages that could turn into foreclosures, which would wreck havoc on the small simmering recovery we do have right now.

Bank of America announced a pilot program where they’re going to take 1000 of these folks, not a whopping number, and offer them a chance to rent out their homes.  The program goes something like this: it’s by invite only so you can’t apply for it and it’s only going to be in Nevada, Arizona and New York for now.

A handful of delinquent homeowners will be offered a chance to rent their homes at a below market value if they sign their deed over to Bank of America.  B of A will then work with local property Management Company’s to collect the rent.

Okay, the then homeowner (now renter) will now get their debt completely forgiven and they get to stay in their home. Now if the program proves to be successful B of A may roll this out on a larger scale throughout the country.

Here is the clincher, in the event that they do that, B of A plans to sell the homes in bulk to investors on the premise that they will hold on to those properties as rentals for at least three years.  Can you say, “The Rich Get Richer…?”

But let’s chat about three years of rentals.  As you know, three years is the amount of time that it takes before a potential homebuyer can jump back into the pool to buy a house  provided that they don’t screw up the rest of their credit.

That’s right and since the entire debt will be forgiven they won’t have a deficiency balance which will make the transition into once again becoming a homebuyer easier.

Will this be the cure for the housing hangover?  What are your thoughts?