Citigroup steps up on loan mods

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As I’ve pointed out, one of the big issues with re-writing the terms of mortgages to make them more affordable is that homeowners often have to start missing payments before lenders will make the time to talk. Not exactly the best way to get ahead of the housing crisis. 

Well, now Citigroup is stepping up with a push to get to struggling homeowners before they go delinquent, especially those living in areas with steep drops in house prices and rising unemployment. From CNN/Money:

The company will determine where the need for mortgage modification is greatest, based on economic conditions, and send out letters to its borrowers in these areas to tell them that help is available should they need it.

This new initiative is open only to borrowers who are still current on their loans but are at risk of defaulting – particularly those borrowers who owe more on their mortgages than their homes are currently worth…

For borrowers who have yet to default, Citi will now aim to reduce their monthly mortgage payment, including property taxes and insurance, to 40% or less of their income. To do that, it will freeze or reduce interest rates, extend the lifetime of the loan or even reduce the loan principal.

I’m always wary of being a cheerleader, but this is a great idea. Bravo Citi. Although, yet again, this program only applies to mortgages Citi held onto, not those sold to investors. And most mortgages, as we’ve come to know so well, were securitized away.