Heading off evictions, bank lets owners become legal squatters

Citigroup Inc. seems to have finally gotten a clue -- We're in a recession. Hello! -- announcing plans Thursday to allow borrowers on the verge of foreclosure in five states to stay in their homes for free for six months if they voluntarily transfer ownership to the bank.

The pilot "Foreclosure Alternatives" program has some clear advantages over an outright foreclosure eviction: because homeowners give up their houses, they take less of a hit to their credit rating and, the lender hopes, they will be less likely to trash that house on their way out the door.

Several similar efforts have already begun, including Fannie Mae and Freddie Mac's version, in which homeowners can give up their deed and become renters. Vacant properties are vulnerable to vandalism, giving banks another reason to keep them occupied. The vandalism concern has been reinforced for lenders in Detroit, for instance, through extensive national news coverage of gutted and stripped neighborhoods, according to Michigan mortgage broker Drew Sygit.