Today Citibank announced its “Foreclosure Alternatives Program,” which has a goal (according to Citi) “to help homeowners make a smooth transition into the next chapter of their lives.”
That’s a nice way to describe a program that’s designed to trap homeowners into paying for utilities, HOA dues, and ongoing maintenance expenses. This can easily cost homeowners thousands of dollars throughout the lengthy foreclosure process. Their reward? $1,000 of relocation money that they were going to get anyway.
From MarketWatch:
In exchange for the deed on their property, CitiMortgage will allow borrowers to stay in their homes for a period of up to six months. At the end of the six months, the borrower will turn over the property deed to CitiMortgage, and CitiMortgage will provide a minimum of $1,000 in relocation assistance to the borrowers. Citi will also provide relocation counseling by trained professionals and will cover certain monthly property expenses if Citi determines that the borrower can no longer afford them. Payment of utilities costs will be the responsibility of the borrower. Other costs incurred by the borrower, such as homeowner’s association and escrow fees, will be determined on a case-by-case basis considering the borrower’s specific financial circumstances. As part of the agreement, borrowers must maintain the property in its current condition and agree to bi-monthly meetings during which trained relocation professionals will help the borrower prepare for the next chapter of their lives.
Before a borrower enters the Foreclosure Alternatives Program, they must first be evaluated for a permanent mortgage modification. For those who do not qualify for a modification or another solution, CitiMortgage will explore the possibility of a short sale in which the company might accept a buyer’s offer for less than the outstanding amount of the mortgage. If a short sale is not feasible, then the borrower may be considered for the deed-in-lieu program. In addition, in order to be eligible, homeowners must hold first mortgages with a clear title owned by CitiMortgage, occupy the property, and be at least 90 days delinquent on their mortgage payments.
This program does nothing to help homeowners. The modify-short-sale-foreclose process is basically the same that homeowners go through anyway.
Here, Citi is asking homeowners to sign a contract that they will continue to pay for utilities, HOA dues, and all property maintenance all the way through the process. Considering that trial modifications and failed short sales could easily cover six months each, the homeowner could easily be on the hook for 1-2 years worth of costs that they could have simply walked away from.
Plus possibly six months more? When exactly does the six months start?
And what happens if the homeowner can’t keep up the property or misses an HOA payment? Can the bank then come after them for that money? It’s a pretty safe bet that the fine print in this Program contract could only open the homeowner up to more future liabilities.
Why would any homeowner agree to something like this? For the $1,000? They’d get that anyway as cash-for-keys. For the Deed-In-Lieu instead of a foreclosure? Many banks will allow that option without any additional contract.
This is nothing more than a way for Citi to trap homeowners into paying for upkeep, utilities, and HOA dues that the bank would otherwise have to pay.
Greg- thanks for bringing this out. Nothing like a wolf in sheeps clothing!!!
Greg – This sounds a lot like the HAFA program. The HAFA agreement the homeowner signs is for the homeowner to maintain the property, pay 35% of their income toward mortgage payments, and complete the short sale within 120 days. All this for $1500 moving money. And if the short sale doesn’t close, the lender gets the house through deed-in-lieu without giving the borrower any moving money. Homeowners facing foreclosure need to be wary of HAFA as well as Citi.
Heather Dunlop
http://buyhouseseattle.wordpress.blog
Not surprising… I hate Citi Bank and Chase.. glad I owe these guys 0.00 now
!!! Never to use them again!!
I am no cheerleader for the banks, but these people did sign a contract to pay their mortgage on time every month, and are now deadbeat defaulters. And let us clear up some semantics, they are not “homeowners,” they are “debtors,” debtors who did not live up to their end of the bargain. A homeowner is someone who has the deed in hand, until then you are a debtor.
I do not see it as unreasonable that the bank would try to get them to pay utilities on a house that they are living in essentially for free.
The point is that Citi has created a program with an enticing name and giving homeowners (or homedebtors) the impression that they are getting some kind of benefit for agreeing to pay for utilities, HOA dues, and upkeep. In reality, the homeowner gets no benefit that they wouldn’t get anyway.
I do concede that the utility issue is probably moot. If the owner wants to stay until the very end anyway, they are probably going to want utilities on.
HOA dues and upkeep can be expensive. My fear is that, if someone signs up for this program and then doesn’t pay the dues or doesn’t keep up the house, Citi will sue them for that money.
PermaLink is right. Why all this sympathy for people who stop paying on their obligations and live free for six months before being given an extra incentive ($1000+) for moving out? If I as a renter stop paying for a month, my family would be kicked out immediately with no relocation payment. There can be some sympathy for a person who is disabled or has a major illness after he/she bought the house but all other cases deserve no such sympathy. These people are living free for almost a year spending money other things or just building their savings. Where is the outrage?
“cry_uncle” comments – taking it a step further, just throw them out on the street and let’s get this foreclosure business over with and let responsible people who rented during this disastrous bubble, buy a home that these bubble fools bought and now lost due to NAR hysteria or out of greed [don't tell me otherwise, as people who bought during the bubble had the choice to rent or buy,] at a price that is inline with salaries for that area, with 20% down, and that is not dependent on two salaries [roughly 3x base salary of ONE individual, as the second salary may act as a buffer, but at any given moment in time, one person may not be working due to various circumstances.]
A trap!!!!. Give me a break. Now a gift becomes a trap.
I believe in the free market so if these squaters fill like they can squeeze even more out of the bank than 6 months rent free then the more power to them but dont call it a trap just because the person living in and using the house actually might have to pay a HOA fee or god forbid they may even have to pay their own utilities.
I’TS A TRAP !
Citibank – you know – the one that raised every Citicard holder’s Visa and M/C interest rate to 29.99% – even those with zero balances and excellent FICO.
Absolutely Criminal.
How is this a trap….
If the homeowner is kicked out of their home wouldn’t they have to find a rental elsewhere and wouldn’t their rental cost be much more than their HOA, Utilities, upkeep, etc.. costs combined?
In fact, wouldn’t these same homeowners have to pay for utilities in a rental?
If you only have one house and are forced to find a rental elsewhere, wouldn’t this alternative be cheaper?
You people are morons. I’m in the midst of a possible foreclosure situation myself, so I’m speaking from experience here. In a foreclosure, short sale, or in the above Deed in Lieu situation, even if the borrower stops making mortgage payments on a home, they are still liable for HOA dues, utilities and real estate taxes, which are not considered as part of a mortgage (unless taxes are paid in escrow). If you fail to pay homeowners association fees, the association has the right under their bylaws to sue for those dues or seek eviction. If you don’t pay real estate taxes, same situation. So regardless of the situation – foreclosure, short sale, deed-in-lieu – the borrower/homeowner will still have these expenses they HAVE to pay regardless of how long they are in the home.
Also, Kashiab and James are right – realistically, the cost per month for taxes, utilities and HOA dues combined is likely far less than what a mortgage payment PLUS those expenses was (in our case, it’s the difference between paying $1,000 a month and $3,500 a month).
If you get an offer like this, take it.