New Program Could Help Half a Million Homeowners

Citi's Plan to Help Homeowners

Citi's program is modeled after the FDIC IndyMac modification program. That plan adjusts mortgages for eligible homeowners currently delinquent so their payments are no more than 38 percent of total income. Citi will modify at-risk mortgages to 40 percent.

Citi will adjust loans by reducing the principal owed, extending the term of the loan or reducing the interest rate. In some cases, Das said, the bank could use a combination of these options such as extending the loan to 40 years and then reducing the interest rate to 1 percent for up to two years in order to provide an affordable monthly payment for borrowers so they can stay in their homes.

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And unlike other programs including the FDIC IndyMac plan, Citi's will be available not just for homeowners already late making their payments, but for any customers who could be at risk due to circumstances, such as a job loss.

"We will preemptively reach out to help at-risk homeowners before they become delinquent," said Das in a statement, "which is critical to avoiding the loss of a home and protecting their credit score and future borrowing potential."

Citi will redirect 600 employees in the sales force to the counseling center in order to call its customers about the program.

Citi also announced that it will extend its moratorium on foreclosures on mortgages it owns. To qualify, a homeowner has to stay in the home, it has to be the principal residence, the homeowner must work in good faith with Citi and have enough income to pay a more affordable mortgage payment. Citi says it has already saved 370,000 customers from foreclosure in the past two years through this program. Das believes extending the foreclosure moratorium will help an additional 50,000 families avoid foreclosure.

Citi owns nearly $200 billion in mortgages and the 500,000 homeowners it plans to contact represent about $50-55 billion.

The initiative only provides assistance to homeowners whose loans Citi owns and currently does not cover the nearly $600 billion in securitized loans owned by investors for which Citi provides loan services. The bank is currently in talks with investors about how to provide assistance to homeowners whose mortgages have been sold as packaged with other loans and sold to investors.