Mortgages: Hand over the keys?
You can read the comments from yesterday’s post. Borrowers are fed up.
A few frustrated bankers are, too. Said one to me,
“You borrowed the money, you have to repay it. When you sell your home for more than you paid, you don't share your profit with the bank. So why should the bank take a loss for your underwater mortgage?”
Well, if you prefer to just get out of the whole thing, the bank will usually just let you hand over the keys.
Citi today says it has a new program for that with a “foreclosure alternative” spin to it. However, I can’t figure out who would benefit from this new deal other than Citi. I couldn’t get them on the phone this morning, so I have to stick to what they put out on Business Wire.
The announcement said that CitiMortgage has launched a foreclosure alternatives pilot program that would allow distressed borrowers in Florida (and Illinois, Michigan, New Jersey and Ohio) to sign over their homes to CitiMortgage, avoid foreclosure, stay in the home for six months, but at the end of the period, CitiMortgage owns the house. The borrower would get some relocation assistance for moving out.
Is this better than just a plain old deed-in-lieu in which you give the lender back the house? Is it a slower process? Does it protect your credit any better?