Borrowers who are lucky enough to have CitiMortgage as their lender may encounter a saving grace in what, for most, is their worst nightmare. One of the US’s largest mortgage servicers, CitiMortgage recently announced the inception of a new pilot program which may well see many embattled homeowners facing immanent foreclosure either keep their homes or receive substantial assistance in finding alternative solutions.

According to Sanjiv Das, CitiMortgage CEO, the company is primarily committed to helping homeowners keep their homes. Sadly though, the realities of the situation are that many simply can’t and loosing their homes becomes inevitable. It is these cases which stand to benefit the most from CitiMortgage’s new Foreclosure Alternatives Program.

This unique program offers homeowners facing foreclosure several welcome benefits to ease the process and allow them to make the transition with the minimum of trauma and upheaval.  This program takes existing deed-in-lieu systems and expands their range of benefits and has been described by Das as deed-in-lieu on steroids.

The program will, in exchange for the property deed, allow homeowners to stay on in their homes for six months with no mortgage payments. At the end of this period CitiMortgage will assist the borrower with a minimum of $1,000 towards relocation costs and will provide professional relocation counseling services. The company will also foot the bill for a number of property expenses should the borrower no longer be able to pay for them.

In addition to these benefits Citi will also forgive any shortfall between the property value and the outstanding mortgage. All these make for an impressive amount of assistance at a time when it is sorely needed by many Americans. Das has expressed the hope that other industry members join in the drive to help distressed borrowers. One can only hope that they do.

According to the HUD report one of the biggest contributors to the initial foreclosure crises was the uncontrolled issue of risky subprime loans. These loans made up an unacceptable percentage of national loan percentages and a large section of national foreclosure activity has taken place among this loan group.

A stead rise in the foreclosure rate amongst the prime, fixed rate loan group due to the deteriorating economy in 2008 and 2009 just exacerbated the crises. The situation was further accelerated by the 1997 Community Reinvestment Act (CRA) which encouraged banks to meet community’s credit needs. This put pressure on banks to meet CRA quotas and no doubt encouraged the practice of risky lending.

HUD suggests in its report that awareness among consumers of credit regarding appropriate mortgage choices had to be addressed as a matter of urgency. Services such as counseling for consumers needed to be increased along with measures to curb the overt, aggressive marketing techniques commonly used by banks.

The report also suggested that efforts be made to outlaw deceptive or misleading loan features often used as marketing gambits by lenders. The report goes on to suggest that practices such as institution of yield spread premium incentives be examined as these tend to encourage the sale of unrealistically  priced loans to consumers.

One of the cornerstones of the HUD report is the focus placed on the need for radical improvements to the general regulatory structure that serves as watchdog to the mortgage financing process. The HUD report suggests that a far greater degree of uniformity is needed in the legislation which governs lending practices across all sectors of the mortgage industry.

The HUD report is an encouraging piece of literature as it reflects a shift in focus at national legislative level to a more sustainable and corrective form of intervention in the beleaguered mortgage market. This bodes well for the long term recovery of the market and would be a critical part of any meaningful measures instituted to prevent a repeat of the phenomenon.

Out of this national figure, six States account for nearly 60 per cent of the total foreclosure filings. They are – California, Florida, Arizona, Illinois, Michigan and Texas. The top ten 10 Metro cities reporting highest foreclosure activity are – Las Vegas (Nevada); Phoenix (Arizona); Modesto; Stockton; Riverside-San Bernardino-Ontario; Merced; Vallejo-Fairfield; Bakersfield (all in California); Cape Coral-Fort Myers and Orlando-Kissimmee (in Florida).

So you can see the foreclosure situation is not bright. If you are caught up in any of above locations, chances are that you are sailing in the same boat with other distressed home owners. Foreclosure is a long drawn process, where the lender and the barrower are put to hardships – loss of time, money and prestige.

The inventory of unsold homes – foreclosed and waiting for public auctions as also repossessed by banks and lenders after foreclosure public auction – are huge. In this melee if your property is caught up, it will be months for you to get back your mental piece.

On the other hand there is an alternative option available in front of you – the Short Sale option. This is a compromise with the mortgage lender that instead of going in for foreclosure – you can sell off your housing property to a prospective buyer, with the consent and approval of the lender. You will be “fully released” from the mortgage debt, by paying off the mortgage on completion of the Short Sale and realization of the proceeds.

Remember – the Government has come forward with tax credit incentives for home buyers – $8000 for first time home buyers; $6500 for home buyers who have lived in their principal residence for 5 years and now wish to relocate to a newly bought house; and increased income limits for individuals and couples.

So the timing is ripe for you to cash in on these favorable circumstances, by exercising the best option of Short Sale of your distressed property.

WILDA RODRIGUEZ

Nations Realty

As per latest statistics of January 2010 the top ten foreclosure-crisis-stricken States are: Nevada; Arizona; California; Florida; Utah; Idaho; Michigan; Illinois; Oregon; and Georgia.

Nevada’s foreclosure filings in January continue to be the highest in the country (for the 37^th consecutive month). Although a decrease by 18 per cent is recorded in the year-over-year figure of foreclosure filings, the rate of foreclosure is four times more than the national average in January. Virtually one in every 95 Nevada housing units received a foreclosure filing – demand notice, actual foreclosure or repossession after foreclosure public auction.

The second highest foreclosure filings are recorded in Arizona. There is 4 per cent increase in the figures in January, compared to the previous month. It is noted that one in every 129 housing units in Arizona received a foreclosure filing.

In both the above locations –  particularly Las Vegas in Nevada – Short Sales are becoming more popular as the best alternative for foreclosure avoidance. This is evident from the figures that 21.1 per cent of all existing home sales in Las Vegas are Short Sales.

Judging from the way Short Sales are becoming more popular among distressed home owners, the Government seems to be keen on encouraging this trend. In December 2009, the U.S. Treasury Department has introduced new guidelines for Short Sale completion.

The law makers in Phoenix Arizona are contemplating a bill, towards making realtors learn the new strategies of Short Sale. It is reported that the State’s Short Sale Task Force has recommended for successful navigation of the Short Sale process and the legislature make it a mandate for realtors to take up 15 hours of Short Sale classes.

In yet another development, the local institution of Las Vegas – Five Star Institute (FSI) has given importance to Short Sale processing. A Short Sale Summit has been slated to be held on March 12, as part of their West Coast 2010 Spring Training. They are planning to conduct exams for a course in Short Sales, where real estate agents and practitioners will participate, to master the skills of Short Sale process. Successful attendees will be awarded with Five Star Short Sale Certificates.

So there is no question –  Short Sale has attracted most of the crisis-ridden home sellers as the best option for avoiding foreclosure.

In comparison with distressed property activity during the month – 13.4 per cent of damaged Real Estate Owned (repossessed by mortgage lenders and banks after foreclosure public auction) property sales; and move-in-ready REO properties accounting for 13.8 per cent – the figure of Short Sales are well above.

What does it mean? Well –  once looked down upon as a slow and problematic process, the Short Sales are getting popularity among home owners, to dispose of their distressed properties as the best method, to avoid foreclosure.

In the home purchase market, as recently as November 2009, the above survey tells that the figures of Short Sales stood at 12.4 percent; while ready to move in REO properties accounted 12.6 per cent and that of damaged REO properties stood at 12.3 per cent of the total real estate activities nationwide.

If you analyze the reasons for the momentum gained by Short Sales activity, you will find that first-time home buyers are mainly attracted by the lucrative sale prices. They get good housing properties – well maintained by the home owner until the time of short sales, in contrast to the deserted foreclosed homes.

According to the survey results, the Short Sales properties are available typically for 91 per cent of the list price, whereas on an average, the ready-to-move-in REO properties are sold at 99% of the list price, quoted by the lenders repossessing them.

Yet another reason why Short Sales are becoming popular is very obvious. By resorting to Short Sales, the lender incurs lower losses in recovery of the mortgage loan. This can neither be guaranteed in a foreclosure sale public auction nor on the sale after repossession. At times, the lender incurs more losses by the upkeep and maintenance of the damaged REO properties. Here also the lender derives advantage by the Short Sales, since the property is being maintained as saleable one, by the distressed barrower.

The troubled home owners escape from the impacts of foreclosure, by going in for Short Sales. Thus the Short Sales route provides a win-win situation for both the lender and the barrower. No wonder it is gaining more popularity, as certified by the Campbell Survey.

Compared to December 2009, the total foreclosure listings reported nationwide put together has been 315,716 homes. This is nearly 10 per cent less than what it was in December 2009, although it is 15 per cent more than the level of January 2009. This figure includes – default notices, scheduled foreclosure actions and repossessions by banks and other mortgage lenders.

Category wise break up also shows decline in the trend reported. From the previous month, Repossessions are down by 5%; default notices down by 12% and foreclosure auctions scheduled to take place are down by 11%. These figures when compared to January 2009 are up by 31%, 4% and 15% respectively. This is understandable from the view point that on a year-to-year basis, the foreclosure activity has gone up.

Distressed home owners burst out a sigh of relief by taking note of the situation obtaining as above, in the real estate markets nationwide. This is because, when there is reduction in the foreclosure activity statistics, the chances are more in disposing off their equities – through Multiple Listings, For Sale By Owner and Short Sales. The pressure brought by foreclosure properties at throw away prices in seeking prospective buyers is somewhat reduced.

Talking of Short Sales, unquestionably there is a spurt from different parts of the country – more specifically from California and Florida – in making use of the escape route of Short Sales. This is getting momentum by the awareness among troubled home owners, as the best alternative in foreclosure avoidance.

By resorting to Short Sales those facing foreclosure processes of their homes or in the verge of foreclosure public auction can get away from the crisis. They can clear the debt from the sale proceeds by getting “forgiveness” for the balance mortgage loan through Short Sale approval of the lenders.

Instead of undergoing the ordeal of foreclosure and ruining the credit history, which can cripple their financial activities for at least seven years to come, Short Sale option can give them the relief much desired. It is in this context the recent foreclosure activity statistics announced for the month of January 2010 are most welcome.