CitiMortgage is launching its pilot program to exchange distressed homeowner's mortgages with a deed-for-lease agreement. Co-developers of the program, Carrington Capital Management and Carrington Mortgage Services, will manage the initial project.
The Home Rental Program aims to provide an alternative to foreclosure and allow eligible borrowers to stay in their homes by entering into a deed-for-lease home agreement. The pilot will be offered to 500 distressed homeowners in Arizona, California, Texas, Florida, Nevada and Georgia.
"As a financial institution, managing a program of this nature is not within our area of expertise, so we joined with Carrington, one of the best property management companies in the country, to help make this program work," said Sanjiv Das, CEO of CitiMortgage. "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.”
According to a statement from CitiMortgage, the eligible borrower transfers ownership of the property to a vehicle established by Carrington Capital and its joint venture partner, Oaktree Capital Management, acting as investment manager. For starters, CitiMortgage already transferred the ownership of loans in its portfolio through the sale of $158 million in mortgages to the Carrington/Oaktree partnership.
“We’re looking forward to working on this important initiative with CitiMortgage and our partner, Oaktree Capital Management," commented Bruce Rose, Founder and CEO of Carrington Holding Company, featured in this month's HousingWire. "Offering alternatives for borrowers looking to stay in their homes and simultaneously relieving their distress is core to the operating principles of our firm and will help substantially in the overall housing market recovery."
Carrington will contact homeowners who meet the eligibility requirements, who have the right to refuse.
Carrington will work with borrowers to establish an optimal pay structure and length for each lease. Lease payments will be determined by local market rates and are expected to be lower than the borrower’s current mortgage obligation.