In its testing stages, the Mortgage to Lease program will involve fewer than 1,000 customers in Arizona, Nevada and New York who are at least 60 days behind on payments for their Bank of America loan. Their homes must be worth less than what is owed on their mortgages
Bank of America will forgive the outstanding debt for homeowners who transfer their home's title to the company.
Customers will then lease their home from BofA for up to three years, paying the prevailing market rate or less for renters -- a sum that will be smaller than their former mortgage payments. Tenants will not have to pay property taxes or property insurance.
"When homeowners are struggling to make payments, owe more on their mortgage than their home is worth and face certain foreclosure, one of their greatest anxieties is the transition process they face in moving from their home,' Ron Sturzenegger, a legacy-asset servicing executive at BofA, said in a statement.
Bank of America will choose all of the participants and will not accept volunteers or applicants.
The program, according to Sturzenegger, could "stabilize housing prices in the surrounding community and curtail neighborhood blight by keeping a portion of distressed properties off the market."
Foreclosure activity fell 2% last month from January, to 206,900 properties nationwide, according to Irvine-based RealtyTrac.
But even though foreclosures reached a nearly five-year low in Nevada, the state still has the country's highest rate. One in every 278 homes in Nevada had a foreclosure filing in February, more than twice the national average.
California's foreclosure activity is at a four-year bottom, but it's still the state with the second-most foreclosures. Arizona is third.