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latest news

Citi unveils
housing relief plan

Banking giant
steps up efforts to avoid foreclosures

By Sam
Mamudi, MarketWatch

Last update: 10:26 a.m. EST Nov. 11, 2008

NEW YORK (MarketWatch) -- Citigroup Inc. on
Tuesday released details of a plan that it said will help mortgage borrowers
remain in their homes.

Citigroup (C:

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, , ) said that under the Citi
Homeowner Assistance program, it would preemptively contact 500,000 mortgage
holders -- involving $20 billion of mortgage balances -- to try to ensure that
they can pay their loans. It said it is focusing on borrowers who live in areas
that are likely to face "extreme economic distress."

Citi also extended its moratorium on foreclosures, saying it won't
begin or complete a foreclosure sale on a home on which it owns the mortgage if
the borrower wants to stay in the home, which is his or her principal residence.
Citi said it will also need to be sure the borrower is working in good faith
with the bank and has enough income for affordable mortgage payments.

"Under our new program we will preemptively reach out to help
homeowners before they become delinquent, which is critical to avoiding the loss
of a home and protecting their credit score and future borrowing potential,"
said Sanjiv Das, chief executive officer of CitiMortgage.

Citi stock was down about 1.5% in early trading Tuesday, at $11.04.
The stock has fallen 62% this year and 20.6% over the past month.

Citi is the latest big bank to announce moves to help prevent
foreclosures. In early October, Bank of America Corp. (BAC:

BAC

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, , ) reached a
settlement with state attorneys general and agreed to work out 400,000 loans
written by its Countrywide unit. See
full story.

And at the end of October, J.P. Morgan Chase & Co. (JPM:

JPM

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, , ) announced
plans to expand its mortgage program to help homeowners avoid foreclosure. J.P.
Morgan said it expects the program to help 400,000 families with $70 billion in
loans in the next two years. See
full story.

According to The Wall Street Journal, Fannie Mae (FNM:

FNM

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, , ) and
Freddie Mac (FRE:

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, , ) will
reveal details of their own mortgage-relief plans at 2 p.m. on Tuesday.

Citi said it is also working with investors to expand the Citi
Homeowner Assistance program to include mortgages Citi services but does not
own.

Tuesday's announcement included details about how the program will
work. A team of trained counselors in Borrow Relief Centers will contact Citi
mortgage holders, focusing on areas with falling home prices and high
unemployment rates. It will reach out to these customers by telephone, mail,
email, social networks and external counselors.

Citi said that since 2007, it has helped about 370,000 families,
representing more than $35 billion in underlying loans, avoid foreclosures.

It added that it recently streamlined its loan modification program
to rework delinquent loans. This revamped program uses a simplified formula to
figure out an affordable payment as a percentage of the borrower's gross income.
It then reduces the monthly payment to that amount by either reducing interest
rates on the loan, extending the loan's term or forgiveness of principal.

"We believe at-risk borrowers should not have to wait until they
are facing potential foreclosure before they become eligible for a loan
modification or a foreclosure pause," said Eric Eve, senior vice president at
Citi.

Sam Mamudi is a reporter for MarketWatch in New
York.

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