"In a normal foreclosure, a lender assumes legal control of the property and evicts the homeowner. But Citi's program, like other "deed in lieu of foreclosure" efforts, allows the homeowner to avoid a completed foreclosure. While the owner must still leave the home after six months, the program results in a less severe hit to the borrower's credit score.
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.
Many housing analysts say these borrowers — particularly those who owe at least 20 percent more than their home's current value — are choosing to walk away because they see little chance that home prices will come back.
Also, many states have lengthened the time it takes to complete a foreclosure, making the process more time-consuming and expensive for the lending industry.
"Why should we all go through the foreclosure process and evict people?" said Sanjiv Das, Citi's top mortgage executive. Avoiding foreclosure, Das said, is "less painful for our borrowers as well as for us."
To me, this seems like it may be a better method of foreclosure for both the lender and borrower. It won't affect the borrower's credit score as much, making it easier for them to get a loan in the future, and it is also shines the lenders in a better light, not showing them as simply kicking out the borrowers from their homes because they can't pay their mortgages. But tell me what you think. Do you believe this is a good foreclosure program? Does it benefit the borrower's and lender's? Does it benefit one more than the other?
I think this method is an improvement on the current foreclosure system, but I'm wondering if it would be at all possible for a bank to produce a deal that would allow borrowers to stay in their homes for an even longer period of time before foreclosure, or to eliminate forclosure completely over time with a new deed. It's unfortunate that so many people have been swayed into taking out loans they can't afford and then being punished for their unawareness in such an agonizing way. I think we need to make this process as easy as possible and restore some of the humanity in the housing market.
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I think this is a great idea. It eases tension a lot, I would assume and
ReplyDeleteI hear that many people trash their homes before they leave, and I'm sure this would help on that front as it gives people a chance to calm down and find other options and new paths, if they choose to pursue them.
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I agree that this would give people more time to come to terms with a foreclosure. It also gives time to find a new place to live, instead of having people struggle after being immediately kicked out. It's too bad that they couldn't use the time to try to raise enough money to stay (I'm assuming that handing over the house deed means that you've no choice but to leave after the 6 months are over).
ReplyDeleteThis is a really great idea. It will definitely give families more time to find another place to stay as well as come to terms with the loss of their house. However, I think that mortgage lenders need to be more up front with their borrowers and not write bad loans which in the end causes people to get in more debt as a result of their negligence.
ReplyDeleteI think that this is a great idea - I feel like it will engender a less negative atmosphere surrounding a foreclosure. Giving residents six months to remain in their house will give them time to find alternate living arrangements without as much stress.
ReplyDeleteThis is fantastic! I mean, the whole situation still sucks. But the very least a bank could do is make it a little bit easier on the people whose lives they are destroying, right?
ReplyDeleteThis sounds amazing. It seems like most banks, in lack of better words, "bully's" when it comes to foreclosing houses. Here, they do their jobs but at least they make it easier on the people who are forced into their situation.
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