Citibank Permits Homeowners To Remain In Homes For Another 6 Months

Citi launched a new program termed Foreclosure Alternatives Program which allows homeowners to remain in their homes for an additional 6 months provided if they return the deed of their property at the end of the period. The pilot program initially expects 1,000 homeowners to participate and is available in Texas, Florida, Illinois, Michigan, New Jersey and Ohio. Citi may expand the program nationally.

In normal foreclosure procedure, the lender re-possesses the property legally by evicting the borrower. Citi’s Foreclosure Alternatives program is an expansion of the ‘Deed in Lieu of Foreclosure’ whereby allowing the homeowner to avoid a completed foreclosure. In addition, it allows the homeowner to remain in the home for an additional 6 months with the agreement that the borrower will return the deed of the property back to the lender.

Normally, a conventional foreclosure takes a more severe damage on the borrower’s credit score. Citi’s program, an expansion of the ‘Deed in Lieu of Foreclosure’ will not severely impact borrowers’ credit scores even if they have to vacate after 6 months.

The pilot program is a way for banks to reduce the problem of homeowners who would prefer to walk away from their properties. It has been reported by Economy.com that more than thirty percent of United States mortgages are underwater. The term underwater describes the mortgage owed to be larger than the current value of the property.

Property researchers are afraid that borrowers who are in debt with 20% or more than their properties are worth are likely to abandon their properties through strategic default or walking away. Majority feel that there is a narrow opportunity for property values to make a come back to previous lofty levels in the foreseeable future.

According to Sanjiv Das of Citi Mortgage, avoiding foreclosure can be mutually less painful for both the homeowner and lender. He said that the goal of the program is to help homeowners make a smooth transition into the next chapter of their lives. Under Citi’s Foreclosure Alternative program, borrowers are still required to pay their utility bills. Citi is committed to paying a minimum of $1,000 per homeowner for relocation costs and will consider helping out in other expenses including the provision of relocation counseling by trained professionals. Other related costs such as homeowner’s association and escrow fees will be determined on a case-by-case basis depending on the borrowers’ unique financial standing.

Part of the agreement will require the homeowners to maintain the property in its current condition and agree to meet twice a month with trained relocation counselors so as to prepare themselves for a smooth transition into the next chapter of their lives.

Program Requirements

Foreclosure Alternatives Program was set up to assist homeowners who did not succeed in getting a loan modification or short-sale. To qualify for the program, borrower must initially be eligible for a permanent modification. If the borrower did not succeed in qualifying for a permanent modification, Citibank will decide if a short-sale will fix the problem. A short sale is when the financial institution nods to selling the home at a price lower than the mortgage amount owed. If the short-sale is not viable, the homeowner may then be turned to Citibank’s Deed in Lieu program or alternatively known as the Foreclosure Alternatives Program.

To meet the requirements of this program: 1. Required to have first mortgages with a transparent title owned by Citibank. 2. Required to be presently occupy the property. 3. Required to be above 3 months late in mortgage payments.

Citibank’s program was released 12 weeks after the release of Fannie Mae’s Deed For Lease program in Nov 2009.

The mortgage giant’s Deed For Lease program permits the borrowers to hand in their deeds in turn permits the borrower to lease the home for a year. Fannie Mae’s program transforms borrowers into leasers once they have turned in their deeds.

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