NEW YORK (CNNMoney.com) -- CitiMortgage, one of the nation's largest mortgage servicers, launches a pilot program Friday designed to ease the pain of some homeowners heading for 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.
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, in a transaction called a deed-in-lieu of foreclosure, the lender saves considerable expenses, especially on legal fees. Because of those savings, CitiMortgage, a division of Citigroup (C, Fortune 500), will grant quite generous terms to participants.
CitiMortgage CEO Sanjiv Das said he knows of no other big servicer with a program like it.
"This is a deed in lieu on steroids," he said.
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.
It includes a pledge from CitiMortgage that it will pay the borrowers a minimum of $1,000 to help with relocation expenses.
"The goal of the program is to help homeowners make a smooth transition into the next chapter of their lives," said Das. "Not every homeowner has the financial ability to remain in their home."
Citi 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.
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 program targets borrowers Citi believes would not benefit from mortgage modifications because they could not afford even sharply reduced mortgage payments. It also applies to borrowers who went through mortgage modifications but fell behind on their payments anyway.
It's ideally suited for borrowers considering walking away from their homes anyway or pursuing an ordinary deed in lieu, said Das.
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.
The pilot program begins Friday and will be confined to six states: Texas, Florida, Illinois, Michigan, New Jersey and Ohio.
If it works in those states, CitiMortgage will open the program up to the rest of the country.
"By helping avoid the foreclosure process, which can be very stressful and distracting, and keeping people in their homes long enough to make an orderly transition to the next stage of their lives, we are also supporting neighborhood revitalization and stabilization efforts, which are crucial to the nation's economic recovery," said Das.
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|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.95%||4.01%|
|15 yr fixed||3.10%||3.12%|
|30 yr refi||3.97%||4.04%|
|15 yr refi||3.14%||3.15%|
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