The bank foreclosure prevention program of CitiMortgage, the mortgage lending unit of Citigroup, has been improving significantly, based on its quarterly report released this week and on the statements of its chief executive Sanjiv Das.
According to CitiMortgage, it has modified 130,000 mortgage loans worth $20 billion in the July-September quarter, increasing its modification rate by 20 percent compared to its modification performance in the April-June quarter. It also reported that three percent of its mortgage loans totaling $751 billion were in the foreclosure process or in loss mitigation schemes, an increase of one percentage-point from the April-June quarter.
According to Das, Citigroup is the only large bank publishing quarterly reports on its efforts to help distressed homeowners save their houses from foreclosure. The reports not only describe the contributions of the bank to the recovery of the housing market, but also provide updates on the nationwide Home Affordable Modification Program and on the achievements of community groups, legislators and the Obama administration.
Citigroup reported that it has modified 82 percent more mortgage loans in the July-September quarter than during the April-June quarter and 85 percent more compared to the same period last year. It explained that bank foreclosure prevention efforts included non-modification schemes like short sales.
In an interview with Dow Jones, CitiMortgage CEO Das said that mortgage lenders now has to look into the possibility of reducing the principal of the loans as unemployment continues to worsen the situation of many homeowners. He added that principal reduction, and not loan restructuring, is the adequate answer to the problem of underwater mortgage loans.
Das also mentioned that unemployment was not considered when the Home Affordable Modification Program was designed. Borrowers eligible for HAMP need to have stable jobs to be able to benefit from the program.
A spokesperson for CitiMortgage, however, reiterated that it has started implementing principal reductions, but only for a few borrowers. He explained that the bank is avoiding situations where all borrowers applying under the HAMP program expect to have their loan principal reduced even if they do not need reductions.
Das also said that CitiMortgage has been considering doing non-HAMP restructuring because HAMP requirements disqualify many applicants. For instance, HAMP does not accept second mortgages into the program.
All in all, the bank foreclosure prevention program of CitiMortgage has helped reduced the number of Citi homes going into foreclosure by about 48 percent from the July-September quarter last year.