New Foreclosure Alternative To Keep Homeowners In Homes, Temporarily

A new program to help ease the pain of some homeowners heading for foreclosure has recently been rolled out by Citi Mortgage. This new plan is aimed at homeowners who are already seriously delinquent, having missed at least three monthly payments, and are on the road to losing their homes.

Under the new program, instead of borrowers falling further and further behind on their mortgages, leading to an eventual foreclosure sale, they can stay in their homes for up to six months, if they agree to then hand over the deed to the lender.

In these cases, by giving the house back to the lender, in a transaction called a deed-in-lieu of foreclosure, the lender saves considerable expenses, especially on legal fees.

The obvious advantage for borrowers is that it allows them time to plan their move to a new home. And while borrowers still lose their homes, the program promises to make the process more orderly and provides benefits for both lender and borrowers.

In fact, under the new plan, Citi Mortgage says that it will pay the borrowers a minimum of $1,000 to help with relocation expenses.

In addition, Citi will also provide relocation counseling and may even cover some monthly property expenses while the borrowers remain in their homes, if Citi determines the borrowers can't afford the expenses.

On the borrower's end of the transaction, they must agree to keep the homes in good condition and to meet with trained relocation professionals every couple of months to facilitate their final moves.

This specific program targets borrowers Citi believes would not benefit from mortgage modifications because they could not afford even sharply reduced mortgage payments. It also applies to borrowers who went through mortgage modifications but fell behind on their payments anyway.

In order to be eligible for the program, homeowners must have their first mortgages with Citi Mortgage, no second mortgage, live in the home and be seriously delinquent on mortgage payments, at least 90 days or three months late.

This new program will initially be confined to six states: Texas, Florida, Illinois, Michigan, New Jersey and Ohio. With plans to open up the program nationally if it works in those states.

It will be interesting to see how many homeowners this affects and its initial execution. And of course we will see if it will be rolled out nationally or if other lenders follow suit. As always we will provide further updates as they become available.