Citi To Take Deeds & Allow Owners to Stay 6 Months

[Ted Akers]

CitiMortgage just announced it will pilot a new Foreclosure Alternatives Program that allows distressed borrowers to stay in their homes an additional six months in exchange for the deed. Beginning Feb. 12, 2010, the program will launch in Texas, Florida, Illinois, Michigan, New Jersey and Ohio. Citi expects 1,000 families to participate in the program. Citi will also allocate a minimum $1,000 to borrowers to assist with relocation.

While a worthy thought, is it just delaying a flood of REO’s into later this year, around the same time we expect a wave of Option ARM recasts which are very likely short sale or REO candidates???

The full article can be seen at the following link:
http://www.housingwire.com/2010/02/11/citi-pilots-new-foreclosure-alternative-across-6-states/

:roll:

[Danielle C.]

In Illinois the foreclosure process takes a minimum of 10 months. In the Chicagoland area, we actually bucked the national sales trend in the previous quarter, in which 33% more homes sold over the same period last year.

So if Citi is obtaining these homes 4mos faster than foreclosure and selling them at a discount where a makret is beginning to pick up, then then they are making a good decision.

With that said... why not just short it out with a 2 - 3 month process at the discount they would move the REO for? This way they are not losing payment for 3 additional months and potentially having other issues (damage to property, homeowner who refuses to move, further home price declines, etc.).

It's a step in the right direcion for homeowners, however still not close to a solution or cure. They should move these properties as fast as possible. Lose the non/ slow performers, tighten lending requirements (which they've done) and ride the storm with a fitter vessel.

Danielle