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Citi Launches Preemptive Loan Modification Program


Citi has become the latest large bank to step up its loan modification efforts, putting in place a new streamlined approach and extending a foreclosure moratorium for select borrowers.

The New York-based bank has launched its so-called “Citi Homeowner Assistance” program, which over the next six months, will reach out to 500,000 at-risk homeowners who are not currently delinquent, but may need assistance in remaining that way.

The effort is expected to result in loan workouts of approximately $20 billion in underlying mortgage balances, with the focus on borrowers in areas that are expected to “face extreme economic distress.”

Loan counselors in so-called “Borrower Relief Centers” will preemptively reach out to customers in high-risk areas, where home prices are falling and unemployment rates are high.

Citi will also put the freeze on foreclosures for an unknown number of “eligible borrowers,” defined as those with owner-occupied residences seeking to retain their homes who have sufficient income and are working in good faith with the bank to find a solution (loan must also be owned by Citi, not just serviced).

The ban and mortgage lender’s streamlined loan modification program is similar to the FDIC/Indymac model, reworking mortgages to affordable levels through mortgage rate reductions, extension of term, or forgiveness of principal.

Since early 2007, Citi has helped roughly 370,000 families avoid foreclosure, representing more than $35 billion in total underlying loan value.

And this year, the company said loss mitigation efforts have kept about four distressed borrowers in their homes for every foreclosure completed.

Shares of Citi were off 53 cents, or 4.66%, to $10.69 in midday trading on Wall Street, hitting a fresh 52-week low in the process.

Despite this, the bank is reportedly on the prowl to scoop up a regional bank after losing Wachovia to Wells Fargo last month.

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