According to reports released in the early part of May, Citigroup homeowners have decreased in the number of those seeking or being granted a short sale or deed in lieu of foreclosure plan, in regards to homeowners who have attempted to qualify for a trial modification or those who may have been denied a permanent home loan modification when a trial was in place. Obviously, homeowners are required by many major financial institutions to explore modification options before being granted either a short sale on their home or a deed in lieu of foreclosure program, but there are questions as to why many servicers are, overall, seeing a decrease in these foreclosure alternatives.
While there are no clear-cut indications as to the lack of overall increases in short sale programs, there are homeowners with Citigroup and other financial institutions alike that have seen increases in permanent modifications and with alternative foreclosure prevention programs becoming more available across the nation, this could be one of the causes that homeowners are not turning to these alternatives, but rather are working to keep their home. While the total number of Home Affordable Foreclosure Alternatives that have been started as of the most recent HAMP reports is a little over 5000, there are options that homeowners may use through state programs or alternative modifications directly from servicers like Citigroup that could be keeping more homeowners from these foreclosure alternative agreements.
Yet, there are some who speculate that homeowners have come to realize that short sales, as one example, do just as much damage to their credit score as a foreclosure, and many feel that with these homeowners still facing difficulties like negative equity, walking away or avoiding the headache that can come with selling a home for a loss are just a few of the reasons that some homeowners may be avoiding these short sale and deed in lieu of foreclosure plans.
On the other hand, increased efforts to address the needs of homeowners who are unemployed or suffering from negative equity may have resulted in fewer homeowners needing to either use a short sale or deed in lieu of foreclosure plan, as again, the federal modification program and programs from the Treasury Department and the Department of Housing and Urban Development are all being used in various areas of the country to address foreclosure prevention needs. Citigroup does still work to provide homeowners with modifications and has made certain programs in various states available through federal initiatives, but many feel that these programs are being offered on a wider scale due to the fact that the inventory that many banks have of foreclosed homes is simply too large and, rather than adding to these foreclosed homes, many are trying to keep homeowners in their property while selling these homes that have been sitting empty.
Short sales and deed in lieu of foreclosures are still made available to homeowners who qualify, but are not always the optimal choice for homeowners as they will do damage to their credit score despite having the potential to be seen in a more positive light by lenders in the future when homeowners have faced financial distress that necessitated they take action to avoid a formal foreclosure.