Citigroup has announced several initiatives to take the pressure off of at-risk homeowners and put a dent in the foreclosure crisis. Its Citi homeowner assistance program targets 500,000 borrowers who are “not currently behind on their mortgage payments” but may need “help to remain current on their mortgages,” according to the bank. The effort should “result in workouts of approximately $20 billion in underlying mortgage balances.”
Citi is also extending its foreclosure moratorium policy, and will “systematically implement its practice of not initiating a foreclosure or completing a foreclosure sale on any eligible borrower where Citi owns the mortgage, the borrower is seeking to stay in the home which is his/her principal residence, is working in good faith with Citi, and has sufficient income for affordable mortgage payments.” The bank attempting to extend this program “to include mortgages Citi services but does not own.”
Elsewhere on the foreclosure mitigation front, the Federal Deposit Insurance Corp. has introduced a proposal that would extend its loan modification plan at IndyMac Federal Bank to 4.4 million problem loans. “Of this total...we expect that about half can be modified,” according to the proposal, with a total book value of $444 billion. Assuming a re-default rate of 33 percent, nearly 1.5 million foreclosures would be prevented. Under the program, servicers would be paid $1,000 to cover expenses for each modification, and the FDIC would share “up to 50 percent of losses incurred if a modified loan should subsequently re-default.” Only owner-occupied properties would be covered. The program carries a $24.4-billion price tag. FDIC chairman Sheila Bair is eyeing the TARP for funding, but Treasury Secretary Henry M. Paulson seems disinclined to go along.