The new loan modification initiative differs from Citi’s existing mortgage mitigation efforts in that it’s a much more proactive plan, said Eric Eve, Senior Vice President, Global Community Relations for Citi.  The credit giant maintains that they will determine where the need for mortgage modification is greatest, based on economic conditions, and send out letters to its homeowners 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 mortgage loans but are at risk of defaulting – particularly those borrowers who owe more on their mortgages than their homes are currently worth. Additionally, their loans must be owned by the bank, rather than sold off to investors.  Citi recently rolled out mortgage modifications to borrowers who were delinquent by cutting mortgage rates as low as 1% for up to 2 years for borrowers who they deemed had the ability to maintain making these lower mortgage payments on time each month. The bank says that its ongoing mortgage mitigation efforts have created about 370,000 loan work-outs since the beginning of 2007. 

For borrowers who have yet to default, Citi says they will help borrowers reduce their monthly home loan payment, including property taxes and insurance, to 40% debt to income ratio. In order to achieve this, they must settle credit card debt  and/ or lower interest rates.  Citi plans tocut mortgage rates while extending the loan term. In some cases they may even renegotiate the outstanding mortgage and reduce the home loan principal.  Das said the new plan will be implemented immediately and the workouts will be handled in a very fast, streamlined fashion to aid as many homeowners as quickly as possible.  Each of these new foreclosure prevention efforts, from Citi, IndyMac, Bank of America and JPMorgan, represent a significant step forward in resolving the housing crisis, according to Jared Bernstein, senior economist with the Economic Policy Institute. But, he adds, the problem remains overwhelming.  “These foreclosure prevention programs are helping but the help is marginal – in the hundreds of thousands of homeowners,” he said. “But help is needed by millions.”

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