Citigroup Short Sale Borrowers Average $12,000 Payments
June 26th, 2011
Citigroup’s mortgage-servicing branch, Citimortgage is making heavy payouts to borrowers who complete short sales in 2011. While in 2009 a short sale merited a $1,500 incentive and 2010 it might earn a delinquent borrower as much as $3,000 to $5,000, in 2011 Citimortgage’s average short sale incentive payout is $12,000[1]. The lender explains the process simply by stating that “incentives will be offered to customers experiencing financial hardship who need funds to proceed with the short sale” and that “the amount…varies according to the borrower’s individual circumstances and loan characteristics.” However, critics believe that the high amount of money offered may be sending the wrong message to underwater homeowners by offering a “cash-heavy payday” for backing out of their loan.
However, Citigroup could certainly argue that its incentives appear to be working. According to Treasury Department HAMP reports, 21,000 fewer Citigroup borrowers were estimated to be delinquent on their loans[2]. While this is likely due to a variety of factors, part of the issue may be that distressed homeowners are resolving their delinquencies and leaving their mortgages behind through the short sale programs. While HAMP supporters would like to represent the improvement as a result of HAMP, it is more likely that the improvement is due, at least in part, to short sales and other foreclosure alternatives becoming more viable options.
Do you think that a short sale should have this type of payoff? Is it too much, or should the lender do whatever it feels is working?
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[1] http://shortsaledailynews.com/citigroups-mortgage-arm-averaging-12000-short-sale-payment-to-borrowers/
[2] http://www.rwbpress.com/2011/06/23/citigroup-homeowner-delinquency-information-in-june-show-decreases-in-homeowners-behind-on-their-mortgage-payment-in-hamp/
June 26th, 2011 at 10:25 AM
Obviously, the lenders should do whatever helps their bottom line. If they would have taken this approach from the beginning of the crisis, we could have averted the “double dip” in housing.
June 26th, 2011 at 11:58 AM
Does anyone know if Indymac/One West Bank is doing ANYTHING positive for it’s delinquent struggling homeowners. Stories like this make me wish I was with another lender. ANY other lender.
What about the PRA (principal reduction alternative) that SUPPOSSEDLY 100 lenders are supposed to be REQUIRED to investigate for loan mod applicants as of Oct 1 2010 thru dec 2012?
Anyone hearing ANYTHING about homeowners receiving principal reductions??.. Maybe doing so would eliminate the need to offer many incentives as short sale could become uneccessary with a reduction of principal.
June 26th, 2011 at 3:00 PM
Since the Federal homestead exemption in bankruptcy is about $20,000, I’d say Citigroup
is getting off cheap, since in many of these cases they can’t produce the necessary paperwork to foreclose or prove their case in
Bankruptcy Court.