Citigroup has announced a new program to offer rental in lieu of foreclosure and eviction to 500 homeowners. The only issue is that Citi isn’t really doing the renting. Actually, Citi has sold $158 million in mortgages to Carrington Capital Management and Oaktree Capital Management.
The mortgage sale does require that the management companies first offer the homes as rentals back to the owners prior to taking foreclosure and eviction actions. This requirement to rent first does not seem to have a minimum amount of time associated with it, meaning no time limit was specified for allowing the homeowner to stay before flipping the property.
Without a minimum lease stay, homeowners could be evicted at any time after their rental agreement initiates, though a Carrington spokesperson has stated that they intend to offer three year leases. Carrington is growing their rental home inventory and states that they want to continue to do so. They’re finding it profitable, even when they’re able to offer the homes for rent substantially lower than the original mortgage payment.
Of course, they’re buying this many homes in bulk at a really steep discount, so the return on the cash invested can be excellent with at-market rental rates. Citigroup stated that they did not do the rentals because their banking regulators wouldn’t allow it, though Bank of America has been doing this for some time now.