A break for those facing foreclosure
(CBS News) NEW YORK - At a meeting in Jackson Hole, Wyoming this week, Federal Reserve Chairman Ben Bernanke hinted that some stimulus action could be coming next month that could bring mortgage rates even more. With 1.5 million properties in foreclosure, two big banks rolled out test programs to keep people in their homes.
Artist and fashion designer Amber Knox was proud to buy a house in Phoenix with her sister. It was 2007 and she was 22.
"I felt like an adult," she said. It was very exciting. We had a house warming party and invited all our friends."
The party didn't last long. Within two years, her sister got married and moved out. Knox struggled to pay the mortgage on her own, just as the housing market was crashing.
Her home lost more than half its value. Then in 2010, she lost her job and fell behind..
"I was scared," she recalled. "I was scared I was going to lose everything. I didn't know what to do."
With only part-time work, Knox was not eligible for a loan modification. She was facing foreclosure and bankruptcy.
Then her lender Bank of America offered this -- a pilot program called "Mortgage to Lease." Rather than foreclosing, the bank takes back ownership, forgives the debt, and gives Knox a chance to rent. She loses her equity, but reduces her monthly nut from $1,250 to $712, and she gets to stay in the house.
Bank of America is rolling out the small test program to 2,500 distressed homeowners in four states. In recent weeks, Citigroup introduced a similar program for 500 homeowners in six states.
The rental agreement is for three years, after that, no guarantees.
"Even though I'm renting, it's still my home," said Knox.
She hopes one day to be able to buy the house back. But at 28, mostly, she's just relieved.
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