Underwater With Your Mortgage? Citi's Deed-In-Lieu Of Foreclosure Offers Borrowers 6 Months Free Rent

Last Updated Feb 11, 2010 6:01 PM EST

Talk about being underwater with your mortgage: One-third of all borrowers owe more than their house is worth.

And more homeowners who owe at least 20 percent more than the house is worth are now walking away from their loans.

Yesterday, Citigroup announced plans for an innovative deed-in-lieu of foreclosure program designed to give borrowers who might have simply let the property fall into foreclosure, and perhaps trashed it on the way out, another option.

Citi will begin the program this week in some states that have been particularly hard-hit by foreclosures: Florida, Illinois, Michigan, New Jersey, Ohio and Texas. About 1,000 homeowners are expected to participate.

For the homeowner in financial trouble, there are a few benefits to the program:

  • You get to stay in your home for an extra six months. While you still have to leave, getting the extra six months can help your kids finish their school year and give you time to pack and plan for your next move.
  • Mortgage payment not required. Citigroup won't require you to make a mortgage payment while you live in the home. That should give you six months to sock away savings - cash you'll need to pay moving expenses and perhaps to put down a security deposit on a new place to live.
  • A deed-in-lieu of foreclosure will hurt your credit history and credit score less than a straight out foreclosure. While your credit score will drop, it might not drop by as much.
There are millions of homeowners who could benefit from a deed-in-lieu of foreclosure program like this one. We'll have to wait and see how many homeowners actually will qualify to join. The trial begins this week - watch this space for results.

If you could qualify for a program like this, would you? Would you want to walk away from your mortgage? Would you be willing to take the credit hit?

Read More:

Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and the upcoming Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com.
  • Ilyce Glink On Twitter»

    Ilyce R. Glink is an award-winning, nationally-syndicated columnist, best-selling book author and founder of Best Money Moves, an employee benefit program that helps reduce financial stress. She also owns ThinkGlink.com, where readers can find real estate and personal finance resources.