Citi's Foreclosure Pilot is a 'Walking Away' Alternative

CitiCitiMortgage is launching a pilot program today in six states for certain borrowers facing foreclosure that would allow them to stay in their homes for up to six months without making mortgage payments — but they would voluntarily turn over the property’s deed at the end of the period.
CitiMortgage, a unit of Citigroup, is calling it an expanded version of a “deed-in-lieu-of-foreclosure,” where a homeowner conveys all interest in a property to the lender to avoid foreclosure proceedings. The program targets borrowers at least 90 days delinquent.
“The goal of the program is to help homeowners make a smooth transition into the next chapter of their lives,” said Sanjiv Das, CEO of CitiMortgage. “The Foreclosure Alternatives Program is another tool in our ongoing efforts to find creative, innovative ways to help our customers across a variety of difficult financial situations.”
In the current housing market downturn and foreclosure crisis, an increasing number of homeowners are in negative equity, or “underwater” in their mortgages, because they owe more than the value of their homes. Those borrowers, in addition to economically-distressed homeowners, are increasingly “walking away” from their mortgages.
By doing so, they stay in the homes for an indefinite period of months without making monthly mortgage payments, but have to deal with the protracted legal torment of foreclosure proceedings.
Mortgage modification programs, including the federal government’s Home Affordable Modification Program, or HAMP, is delaying foreclosures by placing borrowers in months-long trials. But, in the case of HAMP, most have not qualified for permanent relief or have dropped out of the program.
The troubling trends are adding to massive backlogs of foreclosure cases that can drag on for 18 months, particularly in the hardest hit states, such as Florida, where the backlog could reach 800,000 cases by some estimates.
In some cases, distressed borrowers are leaving the homes trashed or in conditions that require some repair.
Under the Citi pilot program, the homeowner must maintain the property in its current condition, and agree to bi-monthly meetings with relocation professionals.
CitiMortgage said it will provide a minimum of $1,000 in relocation assistance to the borrowers. Citi will also pay for “certain monthly property expenses” if the lender determines that the borrower can no longer afford them. Payment of utilities costs will be the responsibility of the borrower.
Before a borrower enters the Citi program, they have to be reviewed for a permanent mortgage modification. CitiMortgage said it will also consider a short sale, in which a potential buyer offers less than the outstanding amount of the mortgage.
CitiMortgage might expand the program to other parts of the United States. Citi said the pilot is expected to help as many as 1,000 families.
Both foreclosures and deeds-in-lieu-of-foreclosures remain on a borrower’s credit report for seven years, initialized from the date of the filings.
Borrowers interested in more information can 1-866-781-0322 or visit http://www.citimortgage.com.

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