Citigroup Inc. is testing a program that would allow distressed homeowners to sign over title to their property and stay on as renters paying less than they did on their mortgages.
The effort is similar to a larger ongoing Bank of America pilot offering up to 2,500 customers the option of avoiding foreclosure by trading their mortgages for leases.
Citigroup's offer is to be extended to about 500 borrowers who owe more than their homes are worth and who are 120 days or more past due on their home loans. The homeowners don't qualify for loan modifications but can afford to rent at market rates, the New York bank announcedWednesday.
"In addition to helping families by keeping homes occupied, the program assists neighborhood revitalization and stabilization efforts, which are crucial to the nation's economic recovery,” Sanjiv Das, chief executive of CitiMortgage, said in a statement.
The program is to be tested starting this month in California, Nevada, Arizona, Florida, Georgia and Texas. It involves $158 million in mortgages that Citigroup has sold to a joint venture formed by Carrington Capital Management, a Greenwich, Conn., hedge fund, and Oaktree Capital Management,the Los Angeles investment giant.
Carrington's Orange County-based loan servicing operation, a specialist in distressed borrowers, will propose the mortgage-to-rent swaps to the homeowners and negotiate leases with those who find the option appealing.
Bank of America's program differs in that the bank itself is handling the conversion of homeowners into renters, with the intent of then selling the leased properties to investors.
A BofA spokesman said the program, which started in March in New York, Nevada and Arizona and later expanded to California, is not yet far enough along to issue a progress report.
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