In trying to limit foreclosures, Citigroup is launching a program to rent homes back to home owners who are struggling to make their mortgage payments instead of trying to evict them.
Citigroup’s announcement comes on the heels of Bank of America, which announced in a similar program earlier this year to try to lessen the number of foreclosures.
Citigroup announced its “Home Rental Program” will rent out 500 homes in its launch of the program. However, the bank doesn’t actually own the homes that it plans to rent but has sold the mortgages to an investor group Carrington Capital Management and Oaktree Capital, Fortune reports. The investment groups have agreed to allow the borrowers a chance to “hand over their home in return for getting the right to rent it back” or they’ll start foreclosure proceedings for the defaulting borrowers, Fortune reports.
Carrington reportedly says it prefers to offer three-year leases to the home owners.
Some have voiced skepticism about the program, particularly since Citi doesn’t actually own the mortgages but the investment groups (which differs from how the Bank of America rental program works).
“Without Citi requiring a minimum three-to-five year time frame for the lease at a fair price, I’m not sure that this program will be very helpful to anyone other than the investors,” John Taylor, chief executive of the National Community Reinvestment Coalition, told Fortune.
Still, the Federal Reserve has recently supported the idea of deed-for-lease programs to help lessen the number of foreclosures, according to a recent Fed white paper.
Source: “Citigroup’s odd Foreclosure Rental Program,” Fortune (Aug. 10, 2012)