Citigroup announced this week that it won't initiate a foreclosure or complete a foreclosure sale on any eligible borrower who seeks to stay in a home if it is the borrower's principal residence and the homeowner is working in good faith with Citi and has sufficient income to make affordable mortgage payments.
Citi said it is also working to expand the program to include mortgages that the bank services but does not own.
Additionally, over the next six months, Citi plans to reach out to homeowners who are not currently behind on their mortgage payments but are deemed as potentially needing assistance to keep current with those payments. This represents about one-third of all the mortgages that Citigroup owns, the bank said.
— The Associated Press
Citigroup is announcing a new initiative Tuesday to help more homeowners avoid foreclosure. Citi says it will lower mortgage payments for more than 100,000 people who haven't yet fallen behind on their payments. Other major lenders have launched their own efforts, and the government has been considering taking more dramatic action to stem foreclosures.
Whitney Williams has a solid job driving a city bus in Boston. His wife and four kids live in the same house he grew up in.
"I've pretty much been in this home all my life. It's my parents' home, and it's been over 36, 37 years," he says.
A few years ago, Williams took over the mortgage after his parents got into trouble with high-interest-rate loans. He and his wife borrowed more to fix up the house, which he now knows was a mistake. They owe around $290,000. The payments were a stretch, but Williams says his mortgage broker promised him he would be able to refinance to get his payments lower — and that wasn't true.
"Bills just started piling up on us, and our mortgage rate kept getting higher," he says. On top of that, Williams' wife had a stroke and had to stop working. He just couldn't make his payments. "My wife, my mom that stays with us now, they're all pretty much dependent on me, you know. And its tough."
Making Payments Affordable
With unemployment rising and the mortgage mess dragging on, a lot more people are going to be in Williams' situation. But the industry and government efforts to date haven't done a whole lot.
Regulators say about 3 percent of homeowners on the verge of foreclosure are currently getting meaningful help to stay in their homes. Now, several companies are saying they're going to do more.
"We will work with the borrower to make the payment affordable," says Sanjiv Das, the CEO of CitiMortgage, which is part of Citigroup. Das says the lender is going to contact homeowners in parts of the country with rising unemployment and big drops in home prices. He expects that about 130,000 of them will need help. They'll be offered lower monthly payments.
"What we are doing is reaching out to these customers proactively, before they become delinquent," Das says. "And we are saying, look, you guys have a range of options available to you."
'Where Is The Personal Responsibility?'
CitiMortage, JPMorgan and Bank of America all are now pledging to lower interest rates for more borrowers or take other steps to keep more people in their homes. Some government plans being proposed would go much further. But not everyone thinks that's a good idea:
"This whole notion that everybody's entitled to own a house — that's a bunch of crap," says Michael Bednark, who lives in Tigard, Ore., and works in sales of heavy truck equipment. He says he is upset about efforts to cut more deals for people who can't pay their loans, especially where taxpayer money is involved.
"People who bought more home than they are entitled to own are getting bailed out on my back," Bednark says.
Many people say they don't like the idea of bailing out a lot of homeowners. Bednark says he has compassion for, say, elderly people who were taken advantage of. But he says he and his family always lived within their means. They bought a modest house. All around him, though, he saw people borrowing money recklessly, taking cash out of their houses to buy ski boats, motorcycles.
"It's insane, what they were doing. So where is the personal responsibility?" he says.
Do Assistance Plans Go Far Enough?
But more economists are coming to the realization that the housing mess is snowballing. The U.S. could be looking at 5, 6 or 7 million more foreclosures. That would really screw up the economy for everybody. That's why the industry and the government are getting more serious about helping homeowners in trouble.
That's encouraging to housing advocates.
"The good news is that the major lenders realize they have to do something," says Bruce Marks, who heads the Neighborhood Assistance Corp. of America.
But Marks says they're not going far enough. He says a plan being pushed by Sheila Bair, the head of the Federal Deposit Insurance Corp., would do a lot more. It would give lenders more incentives to cut borrowers better deals and, Marks says, it would help homeowners on a much larger scale than anything that has been done so far.
"Her restructure solution can make mortgages affordable for over 3 million at-risk homeowners, and that was on the verge of being implemented," Marks says.
The Bair plan appears to have gotten bogged down in negotiations between the FDIC and the White House. But Marks says he is hopeful that it can be revived by the Democratic Congress, or once President-elect Barack Obama takes office.