Clear Debt Now

Written by admin on March 22nd, 2010

Mortgage Companies Helping Families Walk From Mortgage Debt

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The foreclosure process can easily turn into an emotional drawn out procedure. Consumers who become delinquent on their home loans are faced with months of late notices, warnings, demands for payments, and eventually eviction. In the meantime the bank is paying staff to work the accounts while not receiving any payments.

Foreclosure proceedings are sad affairs during which there are really no winners. The banks are dealing with millions of foreclosures and are now seeking alternatives to the ugly process that only creates ill will and desperation among consumers. One of the more recent trends is for lenders to work with distressed borrowers and help them voluntarily leave their homes while avoiding the foreclosure process.

One of the country’s largest lenders, Citigroup, is beginning a pilot program. The program targets those who cannot qualify for loan modifications or those families who do not choose modifications for any reason. Some consumers will pursue mortgage modifications because they do not believe they can afford their mortgage payments over the long term or decide they cannot afford home upkeep.

Citigroup is offering a program whereby some consumers will be allowed to remain in their homes for 6 months without making payments. The idea is that they are being given time to look for alternative housing and by the end of the six months they must give their house keys to the lender.

The fact that Citigroup is even offering this plan indicates that the Obama administration’s loan modification program will not be able to help millions of homeowners. The Citigroup plan will enable consumers to avoid the humiliation and trauma of actual eviction. The hope is also that homeowners faced with foreclosure will not trash the homes out of anger which is a common problem right now.

There is expected to be a large number of foreclosures over the next 18 months. The increasing number of foreclosures threatens the housing market with lower prices and a glut of empty homes. Banks are not in the business of owning homes and this has created balance sheet problems that must be solved before a full economic recovery can occur.

Fannie Mae and Freddie Mac are piloting programs also. The two lenders are letting consumers rent their homes after the houses have been foreclosed on. This enables the owner to remain in the house without disrupting the family and prevents the house from being left empty.

The rent program is called “Deed for Lease”. It is too soon to tell if the program is successful. The agreement is a month-to-month lease. Of course, the question is: if the homeowner could not afford the mortgage, how can he or she afford the lease payment?

There are other potential complications also. Banks are not set up to be landlords. What happens, for example, if the consumer fails to take care of the house properly?

Any consumer facing foreclosure needs to talk to their lender directly and find out what programs are being developed. It is important to be proactive and not ignore demand for payments. The bank is not going to go away and will purse the foreclosure process. But with the many new programs being developed, there just might be one available that can help.

Related posts:

1. More Homeowners Getting Mortgage Relief Assistance Finally
2. House Bargains Getting Harder to Find
3. Foreclosures Rise In December Disappointing Everyone
4. Some Hope…Maybe…For Those Facing Foreclosure
5. Predatory Lending Leads to Foreclosures