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Own to Rent? Citigroup Gets Creative with Mortgages

It seems like the housing crisis has dragged on and on for years. There seemed to be no answer for the continuing foreclosures across the country, with numbers growing every day. Only recently have governments and banks alike really tried to attack the problem head on.

Citigroup's newest angle on underwater mortgages is to sell the mortgage to an investment company that would then take over ownership of the home and rent it back to the residents at a rate lower than what they were paying in mortgage payments, according to The Associated Press.

Is this a good deal for those underwater on their loans?

Here is a little more information about what will happen. Carrington Capital Management purchased the mortgages for $158 million. In those mortgages, it will find homeowners that are in their homes and owe more than their home is worth and seem to have the means to continue paying their mortgage, but are at least four payments behind and determine if they would like to participate in the program, according to the AP.

Once agreeing to participate, the homeowner will transfer ownership to Carrington, which will in return negotiate a reasonable rent to allow the homeowner to stay in the home for a lower monthly payment than there was under the mortgage, reports the AP.

Since part of this program requires that a homeowner be more than four payments behind, this seems to be an alternative to the foreclosure process. However, unlike a foreclosure, this program would let people stay in the house that they’ve been in for a length of time.

Through a foreclosure, the property that was the equity for the loan is transferred to the lender and then sold to pay off the debt owed. In that situation, usually everyone loses because the sale is for less than is owed and the owner gets nothing for the payments that they made for years and years.

Citigroup’s plan might at least help homeowners stay in their house at the very least. However, they won’t be called homeowners anymore, but instead will be called renters. If you are underwater with a mortgage and are offered an option like this, be sure to read all the fine print and possibly talk to an attorney to make sure your rights are properly guarded.

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