) introduced a home rental program to allow distressed homeowners
rent their homes by signing a deed. This arrangement would act as
an alternative to foreclosure.
The home rental program will be managed by the joint venture
between Carrington Capital Management LLC and
Oaktree Capital Group, LLC
). These firms specialize in investing in distressed assets. To
initiate this plan, Citigroup has sold mortgage loans worth $158
million to the venture.
The pilot program will be introduced in the states of Arizona,
California, Texas, Florida, Nevada and Georgia and will involve
about 500 troubled homeowners. This will help homeowners to reside
in their homes and avoid eviction.
Under the "deed-in-lieu" of foreclosure, the eligible borrowers
will transfer their ownership rights to the venture led by
Carrington and Oaktree. For this, the eligible borrowers must owe
more than their home is worth and must be delinquent for more than
120 days. Further, borrowers who cannot qualify for loan
modification but are able to pay rents at market rates, will be
considered for the program.
The suitable candidates need not sign a lease option.
Candidates, who prefer the lease option, will be asked to sign a
deed-for-lease. This agreement would create a lease on the property
and borrowers will be paying a monthly charge on the lease. The
charges would be fixed by considering the local market rates and
are anticipated to be lower than the current mortgage
Earlier this year,
Bank of America Corporation
) had announced its 'Mortgage to Lease' initiative, allowing the
distressed customers (related to foreclosures) to continue staying
in their houses while the ownership of their property would be
taken over by the bank. BofA had launched the pilot project in the
states of Nevada, Arizona and New York and only about 1,000
homeowners became a part of this program.
Citigroup's efforts will prevent foreclosures and assist in
regional development, which will propel national economic recovery.
This program will also benefit the overall housing market by
stabilizing property prices. In addition, the company stands to
gain from lower costs and improved credit quality as its balance
sheet will be able to get rid of the delinquent properties.
Citigroup currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. Considering the fundamentals, we
also maintain a long-term Neutral recommendation on the stock.
BANK OF AMER CP (BAC): Free Stock Analysis
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