Money Minute: From foreclosure to rental -- a great idea [Video]

Sometimes an idea is so good, you have to wonder why no one thought of it earlier. Case in point: Bank of America saying it will allow some distressed homeowners to avoid foreclosure by handing over the title to their property, have their debt forgiven and then remain under the roof as renters.

The bank says it will test the program with about 1,000 homeowners in New York, Nevada and Arizona. If it works well in those places -- and why wouldn’t it? -- it could be expanded elsewhere.

“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,” says Ron Sturzenegger, a BofA spokesman.

Not all people with BofA (or former Countrywide) mortgages would be eligible. Most of the 9 million or so mortgages serviced by the bank are held by other investors like Fannie Mae. BofA owns about 1 million mortgages, and those are the ones that will be considered for the program.

But don’t grab the phone and call in with your willingness to participate. BofA says it’ll do the picking and will contact prospective homeowners itself.

Those who qualify will make rent payments that are less than current mortgage payments and will also likely be below market rates.

Obviously there’s a lot of upside for consumers. Families will be able to stay in their homes. Bank-owned properties will have tenants and won’t fall victim to vandals or squatters. And surrounding homeowners will benefit as well.

The plan could “stabilize housing prices in the surrounding community and curtail neighborhood blight by keeping a portion of distressed properties off the market,” Sturzenegger says.

And on top of everything else, it could provide a big boost to the housing market, which could, in turn, provide a big boost to the economy.

I hope other banks are paying attention.