Citi to let distressed homeowners stay for 6 mos.

[Newsjock]

Source: Associated Press

Citigroup Inc. plans to let homeowners on the verge of foreclosure stay in their homes for six months -- if they turn over the deed to their property.

Citi said Thursday it is launching the pilot program, dubbed "Foreclosure Alternatives," this week in Texas, Florida, Illinois, Michigan, New Jersey and Ohio. Initially, about 1,000 homeowners are expected to participate. Citi may expand the program nationwide.

... The policy is an attempt to deal with what lenders see as a growing phenomenon: borrowers who choose to default on their mortgages. Close to one in every three U.S. homeowners owe more on their mortgages than their homes are worth, according to Moody's Economy.com.

... Borrowers in Citi's program will still need to pay their utility bills. But Citi will pay at least $1,000 in relocation costs and will consider helping out with other expenses. Citi also plans to provide relocation counseling.

Read more: http://finance.yahoo.com/news/Citi-to-let-distressed-apf-1953174036.html?x=0&sec=topStories&pos=5&asset=&ccode=

[AllentownJake]

1. How nice of them

Translation, evicting people has got expensive and local governments have been less and less friendly in helping us out so we have to find a way to entice people to voluntarily leave.

[leftofcool]

6. And just to pour salt on the wounds

The lender takes the home, sends it to Realty Trac who tacks on another 50-70K to the price of the house and sells it to the highest bidder. In many cases, you pay more for a foreclosure than if you had purchased the home from the people who owned it. I discovered this little tidbit by accident. These creeps are getting away with duping people into believing that if you buy a foreclosure, you save thousands of dollars and it just aint so.

[IScreamSundays]

12. Try selling a home in one of those States

Homes sell in markets where there is work. And if the bank sells it they take a bath. I am not a bank fan, but come on...
If you loaned someone money; depending upon the payments, and the borrower says "pound sand", and "I owe more than the thing I borrowed money for is worth" so I think I will just default and make my credit card payments instead, or I am going "BK"; would you let them sit in "your" collateral for 6 months? Get real.

[mbperrin]

14. Bank doesn't care if it sells or not. They get to take every bit of loss

off their income tax plus all expenses. You get a nice little income to report to the IRS, and you pay the taxes on your loss.

Yes, you lost the house, but it counts as income to you that you must pay tax on. They get to deduct it all plus whatever overhead they can dream up.

I worked repos in banks more than 35 years ago. They make money regardless of whether the loans are paid or not. Yes, they make more when they are paid, but they make actual cash flow when they don't and can take it as a loss.

[Name removed]

15. Deleted message

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[WriteDown]

16. Yeah, but a tax write-off is not that great...

So the bigger loss they post, the more money they make? :shrug:

[mbperrin]

23. Certainly reduces their taxes on their other income. AND you can carry it

forward if your total tax for this year is zero.

All without having to make any good faith effort at all to actually remedy mistakes you had a part in making.

All the shit rolls onto the biological person in the deal.

Corporate personhood, sweet!

[WriteDown]

25. That's assuming you're making income...

Many places are posting billion dollar losses each quarter. :)

I'm surprised you're not an LLC with your rental props, but it may not make sense for you.

[Roland99]

22. A kinder, gentler foreclosure.

[tomm2thumbs]

2. they get the deed, they don't have to pay for lawyers, they're doing themselves a favor

plus the house is maintained vs. trashed or broken into during the months they are making a sale of the house - this is all very self serving - Let's face it, they won't do anything that doesn't somehow serve their own purposes.

[AllentownJake]

4. Of course

and the local communities that they are doing this in are having their own kind of mini rebellions going on.

Remember that a Sheriff is a county employee and usually elected. Like any other elected government official, they can selectively decide how to enforce the law. They aren't supposed to, but they do.

I'm sure the 1000 test cases are in the communities that have had the highest foreclosures and the angriest local communities at the foreclosures. Actually reading their listing of states ensure this.

This is a test case of doing foreclosures in areas they destroyed during the bubble.

[WriteDown]

17. Why would they do something that is not in their interests?

Few do that. Its symbiosis. The borrower gets a place to live for 6 months and the lender doesn't have to worry about REO costs for 6 months.

[leftofcool]

3. Alternatives my ass! This is not a new program

It's called "deed in leiu" and banks have been using it for years.

[WriteDown]

18. No...

You don't get to stay in the property for 6 months with a DIL.

[leftofcool]

37. These days you do.

Our neighbors were in their home for about 7 months

[pundaint]

5. Yeah like they could get to processing all those foreclosures any quicker.

If any of you DUers would like to prolong the life of your pockets, you may send me all your coins. Glad to help.

[pipoman]

7. Someone explain how this is good for the debtor?

homeowners on the verge of foreclosure

Sounds like the foreclosure hasn't been filed yet? Which could take several months depending on the lawyers and the courts. IIRC, In my state if a person has lived in a house for 0-5 years, there is a statutory right of redemption of 6 months from the time of service of the foreclosure, meaning that the debtor can stay in the house without paying a dime to the lender for 6 months before they have to leave. If the debtor has lived in the property for more than 5 years the statutory redemption period is a year.

[leftofcool]

8. It isn't and they know it

[WriteDown]

20. That is not what it means at all....

In redemption the home still can be sold at auction. You have the option of selling the home or paying off the debt during the redemption period though. At that point, the buyer at auction is refunded their money. Makes buying homes at auction in redemption states very tricky.

[pipoman]

30. Yea, I don't know how many states are like KS

The bottom line remains that (at least in my state) once the foreclosure is officially served on the debtor, the debtors redemption period begins and during the duration of the redemption period the debtor can stay in the home while remaining in default until the very last day. In fact I know a guy in Wichita who has made an extreme amount of money buying redemption rights from people, a vulturous fortune. What he does/did was go to the district court every day and look for any new foreclosure filings, he would do a title search to find out how long the people have been at the address, mortgages, taxes, etc. Then he would visit the people and offer them cash to move out immediately in return for their rights to redemption. Even if a mortgage has a non transferable clause, once the mortgage goes into foreclosure the terms of the contract are superseded by civil foreclosure statutes which allows for transfer of redemption rights. If the property was worth more than the combined total of mortgages and back taxes he would buy the home. If it was up-side-down he would rent the property out, often not telling the renters that the house was in foreclosure, collecting rent for the entire redemption period, usually several times the amount paid for the redemption rights. He would always collect the rent in person and never tell the renters where his office was. He would just not show up for the rent one month and a few days or weeks later the sheriff will show up and put the unknowing renter on the street. A perfectly legal activity. The bottom line on that being that the redemption rights being a legal asset with a cash value, it is completely legal to sell that asset to another person.

[Joe Bacon]

9. Yeah, what would you expect from...

A prick who would buy assets for pennies on the dollar like this parasite?

[pipoman]

32. Mr. Potter, you're nothing more than a scurvy little spider...

[wroberts189]

33. +1

[Doctor_J]

10. Unless the job market does a 180 over the next 6 months

this seems to be a nice gesture, but probably futile

[Xenotime]

11. They should just give them the house...its only fair.

[Dappleganger]

13. Where are the protests??

People should be taking to the streets over this!

[Zoeisright]

19. Fucking banksters.

I cannot believe that Obama lost his chance to fix this. The banks should have been nationalized last year. I doubt things can be fixed now.

[WriteDown]

21. And then everyone would get free houses...

I want mine on the beach. Do you think their would be a special application for that?

[Robb]

24. Fucking hilarious.

Given it takes any bank nowadays between six and 12 months after payments stop to get a foreclosure together... :rofl: Gee, thanks!

[doodadem]

26. Banks are making a killing on Foreclosures

Speaking from experience, when you manage to pull your home back out of their claws, you not only have to pay the amount you are behind, you also have to pay their attorney's fees--some $5,000 or better. We went thru the modification process with Wells Fargo last year. Sure, they reduced our payments a few hundred bucks. But by the time they tacked all these other fees and crap back on, we're right back where we were.............and trying to get another loan modification, while they are trying to foreclose again, and racking up more attorney's fees that they will make us pay. Again.

What a racket. Like we've talked about before on DU, there were some 30 states in the Great Depression that outlawed foreclosures. That needs to happen again for a few years.

[Missy Vixen]

27. This is the solution, isn't it?

>there were some 30 states in the Great Depression that outlawed foreclosures. That needs to happen again for a few years.<

At the very least, foreclosures should be frozen until those attempting to get into the Making Home Affordable program can get their paperwork from the lender.

One has to ask oneself why the Obama administration has not stopped foreclosures in the USA till further notice. It could be accomplished with the stroke of a pen.

[WriteDown]

29. A free house for 10 years would make a huge difference in my finances...

that is for sure.

[WriteDown]

28. Foreclosure attorneys are separate entities....

Any fees paid to them do not go to the bank. If you're property goes to foreclosure and no one "claws it back" to borrow your terminology then the bank still needs to pay the attorney. That end of the business is often called 3rd party fees.

[w4rma]

31. Yes. That would be the nice politically correct term for it. Thanks. (nt)

:sarcasm:

[bandit599]

34. Even a corporation as big as Citigroup needs good press

Even Citigroup needs to show it has compassion. After all, it's good for business.

[girl gone mad]

35. This has nothing to do with compassion. It's purely a business decision.

Citi gets borrowers out of the homes faster than normal, avoids some costly court fees and uses a small cash incentive to dissuade the debtor from trashing the house on the way out.

[TexasObserver]

36. That's a smart move. They don't really need the house vacant, anyway.

If it's sitting there vacant, it's prone to suffer break ins and vandalism.

This will help a lot of people in transition, even if it is only for six months.

[Samantha]

38. Wouldn't the bank having the deed obfuscate not having the

original mortgage papers? Thinking about those cases where owners say to their current mortgage holder, "Show me the note," when threatened with foreclosure, wouldn't those banks lacking the proper proof of indebtedness make that problem go away by obtaining the deed? Just wondering.

Sam