Citi Gives Lifeline To At-Risk Homeowners

Foreclosure Freeze Aimed At Helping 500,000 Borrowers Stay In Homes

(AP)  Citigroup says it is imposing a moratorium on most foreclosures as part of a series of initiatives aimed at helping at-risk borrowers in states including Michigan remain in their homes - making Citi the latest big bank to announce sweeping efforts to try to curtail losses from souring mortgages.

Citi said late Monday it won't initiate a foreclosure or complete a foreclosure sale on any eligible borrower who seeks to stay in a home if it is the borrower's principal residence, the homeowner is working in good faith with Citi and has sufficient income to make affordable mortgage payments.

Citi said it is also working to expand the program to include mortgages the bank services but does not own.

Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are deemed as potentially needing assistance to keep current with their payments. This represents about one-third of all the mortgages that Citigroup owns, the bank said.

Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal, or increasing the term of the loan, steps known in the mortgage industry as a workout.

Of the four biggest U.S. banks - Citigroup, JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. - Citi has been on the shakiest footing as a result of the mortgage crisis, reporting losses in the past four consecutive quarters while its rivals have managed to post profits. The steps announced Monday are designed to stem those losses.

"Typically the lender loses the most money when a house goes into foreclosure," said Barry Zigas, director of housing policy at the Consumer Federation of America. "(The lender) takes some kind of loss that's usually much greater than what they sacrificed through some kind of workout."

Sanjiv Das, chief executive of CitiMortgage, said, "It is in our interest that borrowers stay in their homes and actually make the payments."

Citi is targeting homeowners in geographic areas with higher-than-average unemployment and foreclosure rates, primarily in Arizona, California, Florida, Michigan, Ohio and Indiana, Das said. The program is expected to affect about $20 billion in mortgages.

"As the unemployment rate is starting to creep up on us, there is going to be increasing distress in the marketplace," Das said in an interview with The Associated Press. "It's not going to distinguish between what type of mortgage they have."

"There is a huge amount of anxiety among borrowers," he said. "We will reach out to them before they become delinquent."

Since early last year, Citigroup has helped about 370,000 families avoid foreclosure, representing more than $35 billion in loans, the bank said.

Citi has avoided negative amortization loans, option adjustable-rate mortgages, and other types of risky mortgages, defaults on which have skyrocketed since the start of the housing bust in the middle of last year. Still, the bank has nonetheless been hurt by the relentless downturn in housing that fed the mortgage and credit crisis, and in turn, the near-breakdown of the financial system.

With defaults mounting, other lenders, including JPMorgan and Bank of America, have also become more aggressive about modifications to mortgage agreements.

But a moratorium only solves so much, according to Zigas. "A moratorium on foreclosure will be effective at stopping foreclosure, it won't be effective at stopping the underlying reasons of why people are in trouble," he said.

By taking a proactive approach, Citigroup isn't waiting until it's too late to deal with delinquent borrowers, said Steve Curnutte, president of InsBank Mortgage in Nashville, Tenn. However, the problem is growing faster than most banks can handle, he said.

"It's nearly an insurmountable undertaking," said Curnutte. "The number of bad loans that they can modify using their resources is being quickly outstripped by the number of new loans that need to be modified."

More than 4 million American homeowners with a mortgage were at least one payment behind on their loans at the end of June, and 500,000 had started the foreclosure process, according to the most recent data from the Mortgage Bankers Association.

Late last month, JPMorgan expanded its workout program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The New York-based bank has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.

JPMorgan also said it will not put any loans into foreclosure as it implements the expanded program over the next 90 days.

Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with state officials in early October.

The government is also working on an ambitious plan to help around 3 million borrowers avoid foreclosure, but details have yet to be released.

[brianp55]

Not everyone that is having difficulties paying their mortgage is a DEADBEAT, or someone that bought way more house than they could afford, and took out an ARM that reset. Some of us were hit by natural disasters (ie hurricanes) and had our insurance cancelled by greedy insurance companies. So to find a company that would insure my house, it ended up raising my insurance costs from under a thousand a year to over $2800.00 per year. I sustained no damage during these disasters, but yet mine was cancelled. Also my property taxes have increased tremendously. When I bought the house 4 years ago, my inclusive payment (fixed rate, 30 year loan at 5.65%) was just $567.00 per month. I could handle that. But now, 4 years later, it has risen to $911.00 per month. It is killing me.

So for all of you that think it can''''t happen to you, you better think again....chromenun

I''m sure all of this is true and unfortunate. But here''s the problem....you are expecting some agency to step in and use someone else''s money to bail you out. For the rest of us, there is no such assistance or compensitory adjustment available. I have no doubt that this could also happen to me and if it does, I''m screwed.

[chromenun]

Not everyone that is having difficulties paying their mortgage is a DEADBEAT, or someone that bought way more house than they could afford, and took out an ARM that reset. Some of us were hit by natural disasters (ie hurricanes) and had our insurance cancelled by greedy insurance companies. So to find a company that would insure my house, it ended up raising my insurance costs from under a thousand a year to over $2800.00 per year. I sustained no damage during these disasters, but yet mine was cancelled. Also my property taxes have increased tremendously. When I bought the house 4 years ago, my inclusive payment (fixed rate, 30 year loan at 5.65%) was just $567.00 per month. I could handle that. But now, 4 years later, it has risen to $911.00 per month. It is killing me.

So for all of you that think it can''t happen to you, you better think again.

[brianp55]

random-radar....

You have expressed the essence of this matter and the solutions required with absolute clarity.

[random_radar]

There is a very simple solution to the mortgage mess that everyone involved agreed to by contract.

Banks that make bad loans go bankrupt and are liquidated.

Borrowers who buy homes they cannot afford are foreclosed upon and lose their houses.

The bankers find new jobs working for more responsible employers and the home owners rent homes from more intelligent land owners.

Problem solved. No tax payer bailouts to give money to the undeserving. No unfairness to responsible people who kept their promises. Justice is served.

What we have instead is cheating, stealing, lying, and gross injustice. That isn''t part of being a free country. How will our nation sruvive with a system that punishes good people and rewards bad people?

[kjlof]

carpriddler, exactly nicely put. The CEO of countrywide made 361 million dollars between 2005 and 2007 then the bank failed and he walked away with more money than any of us put together on this blog will make in two years. Ridiculous noone is worth that kind of money. Doctors who save lives dont make that much. They are told what they will be paid by insurance companies, which is a whole other mess.

[carpriddler]

When a small business owners employees misrepresent a product the blame and legal ramifications are on the owner. We the troops fail the commander is to blame. When the banks fail their executives are rewarded and the customer is blamed.

[docpeter1953]

All I can say is the following:

My wife and I were thoroughly scrutinized before we were granted a mortgage. We had to purchase a home of the size, caliber and location that we could afford, based upon our income. It is wrong to subsidize the mortgages (in any form) of those who can not fundamentally afford the home that they were allowed to purchase. This is VERY unfair to all those homeowners, like me, who were forced to live within their means. Home ownership is a privilege that people earn for themselves...it is NOT a right.

Posted by brianp55 at 12:16 PM : Nov 11, 2008
______________________

I agree with you in principle. However, with the current economy, foreclosure(s), and other financial stresses at this time, we need to make some kind of consessions here in the USA. Unfortunately we ALL will have to make consessions for the few greedy people who were not doing what they were supposed to do in the first place. the bankers WERE SUPPOSED TO BE doing the desciminating of finances, etc. that you mentioned, BUT they DIDN''T, and now we are ALL PAYING the cost for this. We need to start straightening out this mess first and then look to see who is to blame. If those at fault did ANYTHING ILLEGAL then they need to receive the maximum punishment, no probation, no parole, no executive prison, no community service, no parachute, just hard time.

[kjlof]

if thats all you can say is to simplify this situation to your own "me" scenario, then you probably shouldnt say anything at all because their is a much bigger picture here that you are missing!

[kjlof]

everyone gets thoroughly scrutinized but with inflated home prices and laxed lending regulations and banks pocketing millions of dollors everyone became less scrutinizing during these times. The whole idea behind Predatory lending is putting people into loans for the NOW knowing that they wont be able to afford the house LATER. It is in fact a privilege but it is also a right for fair lending practices by the very banks that have abused this system. I hope you never find yourself in trouble in any areas IE: mortgage, unemployment and you probably really shouldnt need social security either.

[brianp55]

All I can say is the following:

My wife and I were thoroughly scrutinized before we were granted a mortgage. We had to purchase a home of the size, caliber and location that we could afford, based upon our income. It is wrong to subsidize the mortgages (in any form) of those who can not fundamentally afford the home that they were allowed to purchase. This is VERY unfair to all those homeowners, like me, who were forced to live within their means. Home ownership is a privilege that people earn for themselves...it is NOT a right.

[carpriddler]

Citi is one of the largest creators of this mess. The banks MBA%u2019s thought it was good business to double and triple the payments, raise the rates, throw people in the street, ruin customers credit %u2013 all because they wanted to hit their bonus levels. Most of the customers the banks came down on were NOT behind in their payments. It was the banks that changed the rules in the middle of the game. Then they blamed the public for not going to law school, or not seeing threw the lies. Every 2 months they send out a new amendment to the original contract. Anyone that has a mortgage, credit card, or loan knows that. Try writing to Citi to tell them you don%u2019t except the last change to the changed agreement.

[kjlof]

docpeter1953 your response is about the most intelligent so far, both sides win. One more problem with house prices down some people are very upside down as cause of the inflated prices between 2004 to 2007. The governments plan and Hope for home owners act only works if the bank is to take a loss so as to get the house back to 90% LTV. Example mortgages total 290,000 house is only worth 250,000 in this example the bank would have to write off the second as a loss backed by FHA guarantee to recoup future equity when the house is sold or refinanced. You see its not free help to these homeowners, for the first five years they would have to split 50/50 any future equity with the FHA backed loan. This could be substantial if the housing market could get stabilized soon. Yep both sides win, half your equity is small price to pay to stay in your home with an affordable mortgage. Lets not forget that property taxes in some areas a month are as much as some mortgages which might take more lucrative structureing of these loans.

[edward1975-2009]

What these banks should be offering their at risk clients, is a fixed rate both can live with. Most of these people are caught in ARM''s that are a credit card payment waiting to happen. This should have been part of the closing that within a year these homeowners had to be in a fixed. Would have saved a lot of taxpayer monies.

[docpeter1953]

Actually, this could be the best idea if it is done right. The homeowner, who is paying through the nose for an ARM could be given a new note for a fixed mortgage, say 5.6%, for the balance of his/her loan. Assuming that their original loan with a 5% mortgage was affordable they may still be able to stay in "their" home AND the bank will still make some $$ for it, just not as much as they originally thought. Both side win. The owner doesn''t face foreclosure, the bank makes $$ and doesn''t have to sell the house for a loss.

You are still left with people who are upside down with their mortgage owing more than the house is worth, BUT they should have negotiated. I had a friend who bought a house, buyer wanted $125K so they said "ok". I heard this and had to tell her to get out of that one as she could have probably goptten it for $110K. Don''t buy a house for the asking price, look for a deal, If the seller won''t deal walk away. I have done this two times and they called me back, I told them I wasn''t interested. You''d be surprised how fast and far the price goes down. I finally bought a house for less than I originally offered, and they paid closing cost. They wanted/needed to sell so I got a better deal.

[kjlof]

you mean government tax dollars, not your tax dollars. You took the stimulus check didnt you? That was tax dollars, your the kind of guy who gets pulled over by the police and then tells him "I" pay your salary you cant give me a ticket, dont you.

[kjlof]

and one more thing to add to this turmoil is GREED. GREED from banks, OPEC, etc. Funny how gas prices have fell dramatically isnt it, yet OPEC talks of easing production in order to raise futures price and get more record profits. As for it being Veterans day, this is the day you do stand and fight. My grandfather lied when he was sixteen to go to Germany in WWII and fight for our freedom, Yours and mine. He was awarded the purple heart and bronze star. He saved his commanding officers life while putting his own in harms way. Im sure this is not what any of them had in mind for the future of America. The only way to put together an informative opinion is to be bipartisan and listen to both sides, no one entity is responsible for the economy we are in, it was several things at once. Praise to our military now that do what we cant as we sit and blog endlessy. Grandpop RIP.

[kjlof]

not all people ran up their credit cards and recieved mortgages they couldnt afford, things change, economy changes and oh yeah how about all the predatory lending that went on with all those inflated house prices. Some people dont live extravagently and really are happy just to get by. I live in a house that my neighbor paid half the price less than ten years ago. This mess came from alternative mortgages, inflated house prices, eased lending regulations from freddie and fannie. This is not about democrat or republican. GET BACK TO WORK and stop blogging.

[hawksprings]

ibsteve2u
Peloozi is the worst Congressional leader there has ever been.
So if it''s such a slam dunk, where are the hearings? Where are the subpeonas? Where''s Harry Waxman dragging every Republican and their grandma up in front of him?

They''re not doing anything because they know the trail would lead right to them, Barney Frank, and Chris Dodd.

[antoniof123]

The fact that there are NO congressional hearings going on right now tells you TONS.

Mainly that it''''s DEMOCRAPS who caused this mess, people like Barney Frank, Chris Dodd, and Bill Clinton.

Also, if this mess were caused by Republicans, the Press would be right behind Peloozi and Reed naming names, and talking about them constantly, doing story after story about how this Republican did this and that Republican did that.

Instead we''''re getting nothing from the Media about who''''s fault this is.

That''''s because this is another Democrap mess, get your head out of your butt and open your eyes!!

Posted by HawkSprings at 10:09 AM : Nov 11, 2008

You do know that congress is in recess and getting ready to go back.

They do have a few hearing already ready concerning the bailout and how to construct more controls. Do you read what is really going on in Washington or do you take your talking points from Rush, Bill, or Sean?

[missingamerica]

answer the question

Posted by jamesm12341 at 10:11 AM : Nov 11, 2008

I get tired of explaining the obvious to you dogmatic dunces.

If energy prices had not surged - causing the price of everything else to surge - an awful lot of those people you seek to criminalize would not have lost their homes.

But you refuse to see that, and I refuse to keep trying to educate those whose need to shirk Republican responsibility drives them to blame all but themselves.