Citigroup Allows Leniency for Victims of Foreclosure

If you are on the verge of foreclosure and your mortgage is through Citigroup, Inc., you may not have to worry about being homeless for a few more months anyways. Citigroup is allowing homeowners who are near foreclosure to remain living in their homes for six months as long as they are willing to release the deed to their property to Citigroup.

The company announced earlier this week that it would be launching this new pilot program, entitled “Foreclosure Alternatives.” For right now, the new program is only available in Michigan, New Jersey, Ohio, Illinois and Florida, but it will probably spread to other states if it turns out to be successful. So far, there are only about 1,000 homeowners who are participating in the program.

Citigroup’s new program will be different than a typical foreclosure in that it allows the homeowner to avoid being foreclosed upon completely and it does not look as bad on their credit. This can help them in the future when they get back on their proverbial feet so it may not be as difficult getting a home loan with better mortgage rates after having learned their lesson.

You might be wondering why a mortgage lender would be offering such a program. The fact of the matter is that about 33 percent of today’s homeowners in the United States owe much more on their home than what it is actually worth. As a result, instead of paying their mortgage payments, homeowners are defaulting on their loans and walking away. This is especially true for borrowers who owe 20 percent more than the current market value of their home. Also, it takes several months in order to actually complete foreclosure proceedings. This has made it more expensive and time-consuming for the mortgage industry overall. Citigroup’s new program aims to lessen the amount of time and cost for foreclosures so it’s not a completely altruistic move on their part. It does help homeowners who find themselves in a tough financial situation, though. Sanjiv Das, a top executive with Citigroup, said the new program makes the foreclosure process “less painful” for both the company and the homeowners, too.

In addition to allowing homeowners to stay in their home for six months, Citigroup will pay at least $1,000 to help the homeowner relocate and the company may even consider paying some other costs to help the homeowner. In addition, Citigroup would also provide the homeowner with relocation counseling to help them avoid this situation again and to help them find something they can afford. However, the homeowner will still have to pay the utility bills for the time they stay in the home.

Citigroup’s “Foreclosure Alternatives” program will hopefully catch on and other companies will take notice of the benefits. We will see what happens, but it sure sounds like a great idea…at least on paper.