Watch CBSN Live

Facing foreclosure? Rent your home from the bank

(MoneyWatch) Underwater homeowners facing foreclosure may have a chance to stay in their homes. According to a press release issued Wednesday by CitiMortgage, the mortgage giant has partnered with Carrington Mortgage Services LLC to establish the Home Rental Program.

The pilot program will be tested in six markets, most of which have been hit hard by the housing crisis. The markets include Arizona, California, Texas, Florida, Nevada and Georgia. To start, the program will offer help up to 500 homeowners in need of help.

The program is designed to provide an alternative to foreclosure, allowing eligible buyer to stay in their homes as tenants with the bank acting as landlord. Under the deed-for-lease agreement, the rental rate would be based on local market rates.

"CitiMortgage remains committed to finding solutions that can ease the burdens of distressed homeowners," Sanjiv Das, CEO of CitiMortgage, said in a press release. "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."

To be eligible for the deed-for-lease program, homeowners must:

  • Be unable or ineligible to receive an affordable loan modification, but have the resources to make monthly rental payments
  • Have a loan in the pilot portfolio serviced by Carrington
  • Occupy the property
  • Owe more than their home is worth
  • Be delinquent for 120 days

To kick-start the program, CitiMortgage has sold $158 million in mortgages to the Carrington/Oaktree partnership, thereby transferring ownership of the loans.

Eligible candidates are not required to accept the deed-for-lease option, but Carrington says in the press release that those who do will receive manageable monthly payments and a customized lease term.

The program does have detractors: Daniel Indiviglio from Reuters writes that "creating bonds from monthly tenant payments faces serious obstacles," noting the "lack of infrastructure for appraising how rentable a home is and at what price."

CitiMortgage is not the only big bank to offer this program. In March, Bank of America launched a similar pilot program for 1,000 borrowers in Arizona, Nevada and New York. The bank expanded the program to 1,500 consumers in California in May.

View CBS News In