Citigroup joins the mortgage modification nation

Citigroup, which owns about 1.5 million mortgages nationwide with a balance of about $175 billion, is stepping up its mortgage modification efforts, reports the Los Angeles Times' E. Scott Reckard.

Citigroup Inc. today plans to announce a six-month program to reach out to 500,000 high-risk mortgage customers who are current on their payments but someday may require loan modifications to stay in their homes.

The New York bank said it would focus on areas with high unemployment and where housing prices have fallen sharply, including California, Arizona, Florida, Michigan, Indiana and Ohio....

The outreach program initially will focus on Citi-owned loans. It said it was negotiating with investors to apply the program to loans it services....

The idea is to reduce the first mortgage payment to no more than 40% of a borrower's pre-tax income by first reducing interest rates, then extending the term of the loan and finally reducing the loan balance.

But critics of such loan modifications say they are fraught with risk.

"Consumers should make sure that they are getting a true loan modification and not a repayment plan," said Lou Pizante, chief executive officer of Irvine's Mavent, which markets automated compliance engine software for the mortgage industry. "Unlike a loan modification, which works like a new and more affordable loan, repayment plans reduce current payments by tacking principal and interest owed onto the back of an existing loan. Lenders can then classify the loan as performing. But the payment shock is just deferred and the borrower usually ends up ultimately owing a lot more."

-- Lauren Beale

Thoughts? Comments?

Photo: Citigroup headquarters in New York City. Credit: Justin Lane / European Pressphoto Agency

Comments

[Corey Goldstein]

This is a sad state indeed and yet completely predictible.

The very same thing happened with the credit card companies when they established CCCS to reduce losses to the banks bottom line. A smart approach, yes, but when you seeking protection from your creditors and you are now looking to your creditors to help you solve the problem, there is a bit of a confict of interest.

Corey
www.fixmyreport.com

[Unanomous]

Is Citi going to contact people directly or those of us who have loans with them, are we supposed to contact them?

[Brian Watson]

It seems to me that Citibank is being a bit disingenuous about trying to workout difficulties with their borrowers. Citibank has my mortgage. I have been current for the entire 3 years in the property. This, despite being in the process of a divorce and making very little money. From an asset sense, I'm not upside down. But from a yearly, fiscal sense, I'm underwater. With my equity declining by the minute, and not having many options, I have put the house on the market and have been pricing it aggressively. In the meantime, I have not paid the taxes current. The plan was, since the soon-to-be-ex-wife won't help pay for anything, despite her making more money than I, was to pay the property taxes when the property sold. I would have sold the property last year but there were attorney's games being played, and continuing to play.
So, Citibank, pays my delinquent taxes and summarily more than doubles my monthly payment with an escrow account for taxes. This is their way of working with homeowners in trouble. Being that we still have over 50% equity in the property, it may well be that Citibank wants to force us into foreclosure. Perhaps they want to raise much needed cash this way? It sure doesn't look like Citibank wants to help anyone but themselves.
Feel free to contact me for further information on this situation. Thanks.
Brian M. Watson
Agoura Hills, CA

[S. Ellis]

Mr. Watson's situation explained above is exactly what Citibank is trying to do to us, being pushed into a repayment plan.

We are in the real estate industry and of course our income has fallen more than usual during the begining of this winter season. We are behind on our payments. Citibank recently sent a letter to us asking us to call to receive the benefits of their new plan.

We called Citibank this morning. This was a long ordeal so I'll boil down what happened. We spoke to Viola in the collection department and were basically asked to give all of the details of personal financial statement. We explained that due to the current market coupled with the slow winter season, we fell behind. She immediately started trying to set us up on a repayment plan, deferring our payment 2 months, then she increased the monthly payments thereafter re-amortizing the late amount due. We explained increasing the payment is not a solution. She said we were not qualified for anything else. But, she said she would fax us a form to be approved for the repayment plan, while discussing this we were cut off...we were on a land line.

We called back, talked to another agent who started the financial details again but then said we're not qualified and once again we were cut off. Called 2 more times trying to complete the plan and discuss options, each time, they cut us off.

On the final call we spoke to yet another lady and she told us a completely different story. She said that if we couldn't make the payment this month, we won't be able to pay it next month or ever in the future and that there is not a plan to help us. After explaining the seasonal income variation of the real estate industry, she once again and by now expected, cut us off.

Though through all of this we kept asking about lowering our payment and temporarily adjusting the interest rate as Citibank agreed to in the $50MM bailout plan, they said they did not have this available. So the game continues.

It appears they are wanting to squeeze until we finally break, going beyond the 90 days overdue, and that will likely happen, starting into foreclosure. Perhaps then they will they pull out the rate reduction plan? Help!

[Michael Snyder]

Once again we see the "genius" of Wall Street in action. After perpetrating the largest Ponzi scheme in history, the Watt St brain trust is looking for yet another way to foist its' bad decisions onto Main St. And their best buddies are not immune. On www.cnbc.com this morning Diana Olick reports on "The Investor "Revolt" Over Modified Loans"

"I’m actually surprised it took this long. As more and more banks announced they were getting more and more aggressive on loan modifications, it seemed the investors in these loans were being just a little too silent.

We’ve talked a lot about the investor “issue” when it comes to loan mods; that so many subprime loans were pooled and sold into the broader markets, making it difficult to modify the loans. Banks like JP Morgan [JPM 27.85 1.73 (+6.62%) ] and Citigroup’s [C 7.23 0.78 (+12.09%) ] modification programs are focused for the most part on loans that are on their own books and were not sold off.

But the massive Countrywide deal with several states attorneys general to do thousands of modifications was bound to hit a snag with investors, and now, according the Wall Street Journal, it has. The paper reports that one such investor in mortgage-backed securities, a Mr. William Frey, is the lead plaintiff in what he hopes will be a class action lawsuit challenging the $8.4 billion Countrywide settlement (Countrywide of course now owned by Bank of America [BAC 14.21 1.36 (+10.58%) ] , which is handling all those modifications). The settlement requires BofA to modify about 400,000 loans, the bulk of which are investor-owned.

It all comes down to who should pay for the big bad mortgage mess. BofA claims Countrywide’s agreement with investors allows modifications of defaulted loans, while the lawsuit claims Countrywide has to buy back any loans that it modifies.

To be honest, I think both sides are wrong and both sides are right and frankly they should split the losses right down the middle. The lenders and servicers did an egregious job underwriting the loans, handing them out to any borrower with an outstretched hand, but the investors on in turn turned a blind eye to what they had to know was a risky bet. Let them all suffer! "

I'm with Diana on this one and I'm up to my eyeballs with millionaires reaching into my pockets to protect their margins. Instead of freeing consumer credit six months and untold billions of dollars in Federal loans and give-aways have accomplished nothing more than padding the pockets of the very folks who engineered this mess in the first place. The first batch of "low cost loans" fueled the commodities bubble last summer and we've been doing nothing but bailing out the folks who made those bad bets ever since.

I've got a hot new flash for the Three Stooges (Bush Bernanke & Paulson) that have run our economy into the ground; your friends on Wall St. are junkies! Only instead of crack or heroin they're hooked on their own inflated egos and greed. Giving them more money makes you their "connection", and you're just enabling the addicts. Now if you want to dip into your personal account and buy up some Citigroup, go for it; but I think it's a bad investment. The entire financial sector has been blowing smoke up it's own backside for so long I'm betting nobody has a clue what any given corporation is worth.

Reganomics is dead. Now my concern is seeing a foundation laid for small business to lead us out of this mess. I really don't care what the likes of Feinstein, Boxer & Frank think; every business traded on any exchange anywhere in the world started in someone's garage, backyard or barn. It's about time we rejoined our roots.

[rONALD BROWN]

CAN YOU SEND ME DOCUMENT TO DO A MODIFICATION LOAN AND WHAT I WILL NEED TO SEND YOU THANK YOU RONALD BROWN

[Ralph Davis]

This all sounds great on the banks part but it often doesn't work like they tell us. I contacted them for a loan modification and after the seven weeks of endless phone calls and reaching people that didn't know what their company was doing, they finally assigned me a person who was to help me with the modification process. The sad part of their efforts was that after they were finished, I owed them almost $3 a month more on my payments to them. What is this all about? I couldn't afford the pre-modified payment mush less the post modified payment. I then contacted www.mortgageRecovery.com and spoke with them. Their professional agents immediately took over and handled it for me. With-in 60 days I had a true modified loan that was affordable for me. I applaud the efforts of the people at Mortgage Recovery (they even offered me a money back guarantee). I hope those of you who are suffereng as my wife and I have, during this trying financial time, will be encouraged as there are companies out there that can really help.