CitiMortgage offers option for N.J. homeowners in default

Deed in lieu of foreclosure

By Sean Sposito/The Star-Ledger

February 11, 2010, 4:00AM

AP PHOTO The fourth-largest mortgage servicer in the country is offering homeowners in New Jersey who are 90-days late on their payments a chance to walk away with cash.

CitiMortgage, a unit of Citigroup, will announce today a trial program that lets borrowers remain in their homes for six months after signing a deed-in-lieu of foreclosure contract — so called because owners agree to hand over their homes to the lender.

These borrowers also will receive at least $1,000 in relocation expenses.

“Basically, the lenders are giving defaulted owners cash for their keys,” said James Bednar, who writes a real estate blog at njrereport.com.

He said some participants could eventually end up saving as much as $20,000 after relocation expenses and mortgage payments.

The process, however, isn’t simple.

To participate, the borrower’s first mortgage must be with Citi and there must be no other liens on the home. Even then, the bank can turn down a deal after taking a closer look.

Still, it offers some benefits for the bank. Rather than going through a costly foreclosure, the bank gets the property without paying lawyer and court fees. And under the new pilot program, Citi does not have to wait eight months to a year-and-a-half after filing an initial foreclosure notice before getting its hands on a property.

“It’s probably going to take you 200 days to just get up to the sheriff’s sale mark,” Bednar said.

Real estate agents also said the program could have an adverse effect on New Jersey’s already troubled housing market by driving down prices.

“They’re going to have to be at a lower price than everyone else,” said Sal Poliandro, a Saddle River-based real estate agent, of the homes that will eventually go up for sale. “Not only are they going to have these houses on the market, they are going to be encouraged to sell them quickly.”

But the program is relatively small. And while a spokesman for the lender could not say how many people will be eligible for the pilot here, he did say the lender only expects a small number of owners from New Jersey, Texas, Florida, Illinois, Michigan and Ohio to participate initially.

“We’re ramped up to handle about 1,000,” said Mark Rodgers, a New York-based CitiMortgage spokesman. “If we get close to that number, we would have to reconsider.”

Citi is eventually expecting about 20,000 participants in total. There is no end date for the program.

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