If your bank offers to rent your underwater home back to you in order to save it, be very wary and contact Los Angeles Foreclosure Attorney Vincent Howard.
Two major banks - Citigroup and Bank of America - have been using this program, and some of the practices have come under fire.
While the programs were lauded when first announced as a viable solution to alleviate some of the housing market troubles, it now appears they may have little benefit whatsoever to the homeowner.
In fact, it's not actually a rental program at all - it's more of a sales opportunity for the bank.
Specifically, Citigroup was to launch the program with 500 homes, which would be rented back to former owners in an effort to keep them in their houses. The program is titled, "Home Rental Program." (Catchy, isn't it?)
The problem is, that Citigroup doesn't actually own those homes anymore. Those residences were sold to an outside investor group and management company for about $160 million. That means that Citigroup has no real stake in keeping people in their homes and no real authority to say what happens to those mortgages or the people who once held them.
Basically, it would work like this:
Your home is foreclosed on. That still goes on your credit with all of the negative side effects. Then, the bank sells that home to an investor group. The investor group then hires a management company, which in these cases has agreed to give the homeowner first dibs on renting back their old home, usually for a lease of three years.
Now, that's not to say this might not be an option for you if you're going to foreclose anyway and don't want to have to leave your home or your neighborhood. But the chances of getting a loan to repurchase that home at a fair market rate anytime soon with that foreclosure mark on your credit score aren't great.
Additionally, there is nothing in the agreement that bars investors from turning around and flipping the property at any point after the lease is up, or even evicting you if the home is sold. Essentially, it's no different than any other rental.
That means the only people this is really helping are the investors and the bank.
In fact, you may actually be getting a worse deal. These investors, who more likely than not purchased the properties for a reduced rate, have no real incentive to offer a mortgage or mortgage modifications to the homeowner - particularly not if they can get more by flipping it. That puts you in a precarious situation as a renter.
And once your home is foreclosed, and particularly if the bank has already re-sold it, you are not entitled to the loan modification options that were laid forth in the $25 billion settlement a few months back. It's possible that the investors could work out a deal to modify the loans, but they don't have the same kind of incentives that the five major banks did following that settlement with attorneys general in 49 states, including California.
This means your chances of getting a better mortgage deal are greatly diminished through this program.
What's more, the specific investor group that purchased these loans hasn't had a great track record for working with homeowners. In fact, there have been a number of cases in which homeowners claimed they were charged outrageous fees by the lender, and twice they've been taken to court.
It's not worth the risk. If you're facing foreclosure, Los Angeles Foreclosure Defense Attorney Vincent Howard can help you explore all your options.
Citigroup's odd foreclosure rental program, By Stephen Gandel, CNNMoney