For three years, Clark Howard has taken heartbreaking calls from homeowners who've felt there's no way out of the housing mess they're in. Approximately one in four Americans owe more on their house than what it's worth. A fraction of those one in four can't make their monthly payment.
Lenders have been just as confused and frustrated as the borrowers through the whole downward spiral in the housing market. Bank of America is now trying something that's very unique: They've been soliciting people to do a deed in lieu of foreclosure.
Here's how deeds in lieu work: The bank agrees to take your home back without foreclosing on it. They also agree not to seek deficiency, which are losses on the loan they're entitled to in most states.
Syndicated financial writer Kenneth Harney says Bank of America is offering this option to 100,000 people across the country. While your credit will take a hit, it won't be as severe as with a foreclosure. And get this: The bank is even paying a relocation fee of $3,000 to $15,000 to get people to move!
Why would a bank do this? Because if those houses go into foreclosure, they can become vandalized or be taken over as drug houses. Whatever remaining value was there is then destroyed. So it's a practical decision for Bank of America to experiment with this tack.
Remember, it's not like tying things up with a tidy bow. Someone is still homeless in the end. But this could be a possibility if you've exhausted all other chances to get out from underneath your house.
We'll let you know if Bank of America expands this program beyond the 100,000 people it contacted as a trial group.