All homeowners fear the idea of a foreclosure. If a household is not able to pay the balance on their mortgage, then the lenders may force the sale of the home in order to obtain the payments that they are entitled to. This means that you will lose your home, and will not receive any of the profit of the sale. About 3.8 million households filed for foreclosure in 2010, and the filings only escalated in 2011. The present economic situation has caused many families hardship, and when they are not able to afford their homes, foreclosure is sometimes the inevitable solution to a pile of unpaid statements.

According to HousingWire, the government hopes that 2012 will see a drop in the amount of foreclosures, as people begin to stable themselves financially. The Obama Administration is actively trying to reduce the amount of foreclosures in the U.S. by making homes more affordable, and assisting unemployed homeowners. Many lenders do not like foreclosures because they are time-consuming and pricey. One lending processor service says that the foreclosure usually takes 2 years and costs about $78,000. Because of this, the Federal government is searching for alternative methods to foreclosure which would help to reduce the amount of abandoned homes and heartbroken families across the nation.

One of these new alternatives is an initiative by Bank of America, which was announced to the public last week. According to the Chicago Sun-Times, the bank will launch a pilot program that allows homeowners-at-risk to foreclosure a way out while still allowing them to stay in their homes. The bank will purchase the homes from the families, and then allow them to remain as occupants and pay a rental fee. A little less than 1,000 debtors in New York, Arizona and Nevada are a part of the new test run. Bank of America has targeted borrowers who are at a considerable risk to foreclosure and have high loan balances relative to their home's value. These people have exhausted all loan modification programs and have been late on their loan payments for at least two months.

The individuals chosen to try out this new method will need to transfer the title of their homes to Bank of America, which will give them the funds to repay their mortgages. Next, the family will be able to rent the home from the bank for the area's market rental rate (or below the market rental rate in some cases.) The bank guarantees that the rental rates will be less than the owner's original mortgage payments, making it possible for them to afford their place of residence.Along with a lower monthly payment, transferring the title deed of the home will allow these people to avoid paying property taxes or homeowner's insurance. A lot of well-to-do families will be able to get back on their feet with fewer expenses to deplete their savings' accounts, and will not need to relocate.

The program is formally known as a "mortgage to lease" and uses a popular technique for lenders called a "deed in lieu of foreclosure." In the 1930's, the Great Depression made this technique very popular while American families worked to make ends meet. Eventually, the banks plans to sell homes to investors and hope that some real-estate investors may partner with them in buying homes and allowing the original owners to remain as tenants. Time will tell whether or not this new program can make a significant impact and lessen the amount of foreclosures in the United States. As the program develops, more and more American citizens may be eligible for this alternative and be able to keep their homes for years to come.