Citigroup Inc. plans to let homeowners on the verge of foreclosure stay in their homes for six months -- if they turn over the deed to their property.
Citigroup Inc. plans to let homeowners on the verge of foreclosure stay in their homes for six months -- if they turn over the deed to their property.
Citi said Thursday it is launching the pilot program, dubbed "Foreclosure Alternatives," this week in Texas, Florida, Illinois, Michigan, New Jersey and Ohio. Initially, about 1,000 homeowners are expected to participate. Citi may expand the program nationwide.
In a normal foreclosure, a lender assumes legal control of the property and evicts the homeowner. But Citi's program, like other "deed in lieu of foreclosure" efforts, allows the homeowner to avoid a completed foreclosure.
While the owner must still leave the home after six months, the program results in a less severe hit to the borrower's credit score.
The policy is an attempt to deal with what lenders see as a growing phenomenon: borrowers who choose to default on their mortgages. Close to one in every three U.S. homeowners owe more on their mortgages than their homes are worth, according to Moody's Economy.com.
Many housing analysts say these borrowers -- particularly those who owe at least 20 percent more than their home's current value -- are choosing to walk away because they see little chance that home prices will come back.
Also, many states have lengthened the time it takes to complete a foreclosure, making the process more time-consuming and expensive for the lending industry. (continue reading here)
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