Citigroup Is Latest to Join Loan Modification Program
Citigroup is the latest lender to commit to the government's program to modify second mortgages.
Citigroup's program is part of the Obama administration's $75 billion loan modification program aimed at helping customers stay in their homes.
The second-mortgage modification program offers lenders who made "piggyback" loans — second mortgages that allowed consumers to make a small or no down payment — incentives to lower payments or eliminate the loans entirely.
The program could help relieve some drag in the housing market. Lenders who extend second mortgages — fearing they won't be repaid — can veto a borrower's efforts to modify their primary mortgage.
On Wednesday, Bank of America said it will forgive up to 30 percent of some customers' total mortgage balance.
Meanwhile, the US Treasury said it is committed to spending the full $50 billion in bailout funds it budgeted for mortgage modifications but will consider changes to make the program more effective.
Herbert Allison, Treasury assistant secretary for financial stability, in testimony prepared for delivery to the House Oversight and Government Reform Committee, said the Treasury would continually evaluate expenditures in its Home Affordable Modification Program, or HAMP.
"Treasury set aside $50 billion in TARP funds for HAMP. We remain committed to stabilizing the housing market and using the full $50 billion budget to reach and assist at-risk homeowners," Allison said in his remarks, a copy of which was obtained by Reuters.
Included in the protections, mortgage companies will have to evaluate all borrowers who have missed at least two payments to see if they are eligible for the $75 billion program, the Treasury Department says.
The companies also must not foreclose until homeowners are found ineligible or don't respond to outreach efforts. Borrowers will be able to get decision on their application within 30 days.
—AP and Reuters contributed to this report