CitiMortgage Program to Aid Borrowers Avoid Foreclosure Costs

According to an article written by Les Christie, and published on CNNMoney.com, CitiMortgage, one of the nation's largest mortgage servicers, launched a pilot program Friday designed to ease the pain of some homeowners heading for foreclosure.  The program, a modification of a traditional deed in lieu of foreclosure, gives borrowers new and substantial  incentives to avoid the legal and administrative costs of foreclosure.

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. 

CitiMortgage will then, additionally, pay the borrowers a minimum of $1,000 to help with relocation expenses.  CitiMortgage 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.Citi will also forgive any difference between the value of the home at time of repossession and what the borrower owes. Once the deed goes back to the lender, the borrowers walk away free and clear.

To be eligible, homeowners must have their first mortgages with CitiMortgage, no second mortgage, actually live in the home and be seriously delinquent on mortgage payments, at least 90 days late.  It also applies to borrowers who went through mortgage modifications but fell behind on their payments anyway.  For their part under the new program, borrowers 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.

The borrowers the program targets are already seriously delinquent, having missed at least three monthly payments, and are well on the road to losing their homes. By giving the house back to the lender, the lender saves considerable expenses, especially on legal fees.  The biggest advantage for borrowers is the time it gives them to plan their next moves. And while borrowers still lose their homes, the program promises to make the process more orderly and provides benefits for both lender and borrowers.

The pilot program is confined to six states: Texas, Florida, Illinois, Michigan, New Jersey and Ohio.  But, if it works in those states, CitiMortgage will open the program up to the rest of the country.