Citigroup's (C.N) mortgage unit said it is testing a program to rent homes back to borrowers instead of foreclosing on them and eventually kicking them out.
CitiMortgage's new program, which follows in the footsteps of one at Bank of America Corp BASC.N, will offer 500 borrowers the chance to hand over their deeds to the bank. In exchange, Citi will then offer leases so homeowners can rent their houses back. Their monthly rent will be lower than their prior mortgage payment.
"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," CitiMortgage Chief Executive Sanjiv Das said in a statement.
The program will be tested in the six states that have been ravaged the most by the foreclosure crisis: Arizona, California, Texas, Florida, Nevada and Georgia.
Eligible borrowers must owe more than their home is worth, be delinquent for more than 120 days and have the resources to make the new rental payment.
The program will be managed by Carrington Capital Management and Carrington Mortgage Services, which specialize in servicing distressed real estate assets.
(Reporting By Michelle Conlin; Editing by Steve Orlofsky)