On February 11, 2010, Citigroup announced plans to introduce a pilot program that would let homeowners on the verge of foreclosure stay in their homes for six months, provided that they turn over the deed to the property; otherwise, known as a deed-in-lieu (DIL) of foreclosure.
Citi will begin the program, called Foreclosure Alternatives, this week in some states that have been particularly hard-hit by foreclosures: Florida, Illinois, Michigan, New Jersey, Ohio and Texas. About 1,000 homeowners are expected to participate.
For homeowners in financial trouble, there are a few benefits to the program:
- You get to stay in your home for an extra six months. While you still have to leave, getting the extra six months can help your kids finish their school year and give you time to pack and plan for your next move.
- Mortgage payment not required. Citigroup won’t require you to make a mortgage payment while you live in the home. That should give you six months to sock away savings – cash you’ll need to pay moving expenses and perhaps to put down a security deposit on a new place to live.
- A deed-in-lieu of foreclosure will hurt your credit history and credit score less than a straight out foreclosure. While your credit score will drop, it might not drop as much.
- Citi will pay at least $1,000 in relocation costs and will consider helping with other expenses. It also will offer relocation counseling.
Borrowers in Citi’s program must still pay utility bills. Borrowers will be required to “maintain the property in its current condition,” the bank said.
Something formally needs to be done in addition to the modifications,” said Sanjiv Das, chief executive of CitiMortgage. “We are in a different stage of the housing cycle. Restructuring mortgage payments was part one of the cycle, making sure that foreclosure glut doesn’t hit the industry is part two of the cycle. Citi is trying to stay ahead of it.”
Sanjiv also said the program is “less painful for our borrowers as well as for us.”