- Major loan modification program

November 2008

Last Tuesday Citigroup joined JPMorgan Chase and Bank of America in announcing a major loan modification program. The bank's CitiMortgage unit is offering to modify the terms of mortgages for borrowers at risk of falling behind on their payments. The Citi Homeowner Assistance program plans to contact about 500,000 homeowners in the next six months, involving up to $20 billion in mortgages. Citigroup's loss mitigation efforts have already prevented about 370,000 foreclosures on $35 billion in loans since early last year.

That same day, administration officials in Washington announced a plan for refinancing delinquent loans held by Fannie Mae and Freddie Mac, the now government-controlled giant mortgage companies. This could result in lower payments for hundreds of thousands of homeowners. The program builds on the Hope Now program already in place. The goal is to reduce mortgage payments to no more than 38% of a family's monthly income. Slowing the pace of foreclosures is key to our recovery and these programs all help.

You probably heard foreclosure filings were up in October, 25% over the previous year. But foreclosure filings were up only 5% over the previous month and some states actually had declines. Lost in all the noise was the fact these filings don't all wind up as foreclosures. Borrowers are able to refinance their mortgages, negotiate loan modifications, workouts or short sales with lenders.