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Bank of America Mortgage to Lease Program


CONeal
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Sorry for the 100th thread posted about BAC.  The Mortgage to Lease program was announced last month as most of you are probably aware. 

 

http://mediaroom.bankofamerica.com/phoenix.zhtml?c=234503&p=irol-newsArticle&ID=1675653&highlight

 

Hope someone can help with the question that keeps spinning in my head.  Under the assumption that this program has some success and the bank decides to expand it on a large scale.  How would the loan write offs/rental property affect their capital ratios?  Is there any other consequences this program could have to their balance sheet?

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How would the loan write offs/rental property affect their capital ratios?  Is there any other consequences this program could have to their balance sheet?

 

My uninformed impression is that it boosts their balance sheet..

 

Reasoning:

1)  After a period nonperforming status, a loan has to be marked to net realizable sale value including the legal costs of getting the person out of the property, realtor sales commissions, etc...

2)  If you instead just own the property and rent it out you then carry it at a value that doesn't include the legal costs of getting the person out of the property, doesn't include realtor commissions, etc...

 

Just a thought...

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