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Gov't to announce new loan aid effort & Housing agencies to widen homeowner help & Citigroup to help at-risk borrowers stay in homes
Gov't to announce new loan aid effort
By ALAN ZIBEL, AP Real Estate Writer
WASHINGTON – The government and the mortgage industry are launching the most sweeping effort yet to help troubled homeowners by speeding up the process for renegotiating hundreds of thousands of delinquent loans held by Fannie Mae and Freddie Mac.
The Federal Housing Finance Agency, which seized control of the two mortgage finance companies in September, announced the plan Tuesday along with officials from the Treasury Department, Wells Fargo & Co., the Department of Housing and Urban Development and Hope Now, an alliance of mortgage companies organized by the Bush administration last year.
It likely will have tremendous importance because Fannie Mae and Freddie Mac own or guarantee about half of U.S. home loans.
The approach, which goes into effect Dec. 15., "will be a standard for the industry to quickly move homeowners into long-term sustainable mortgages," said Neel Kashkari, the Treasury Department's assistant secretary for financial stability in prepared remarks.
To qualify, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 percent or more than the home is currently worth.
The interest rate would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses.
Another option is for loans to be extended from 30 years to 40 years, and for some of the principal amount to be deferred interest-free.
While lenders have beefed up their efforts to aid borrowers over the past year, their earlier efforts have not kept up with the worst housing recession in decades.
More than 4 million American homeowners, or 9 percent of borrowers with a mortgage were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.
Indeed, Tuesday's announcement comes too late for Troy Courtney, a 44-year-old San Francisco police officer.
He moved out of his home in Mill Valley, Calif., at the start of this month — taking his children, three dogs and one cat with him — after failing at several to attempts to get a loan modification or a short sale — where the lender agrees to receive less than the loan is worth.
Courtney worked overtime and tapped into his retirement account to try to catch up with two loans on his home. But in the end he couldn't convince Countrywide Financial, which managed the loan for Wells Fargo, to modify the loan.
"I feel like I missed the boat," he said of the new efforts to help more homeowners. "I'm just mad at the whole system."
One reason the problem has been so tough to solve for borrowers like Courtney is that the vast majority of troubled loans were packaged into complicated investments that have proven extremely difficult to unwind.
Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged and sold in slices to investors around the world.
The remaining 20 percent are "whole loans," which are easier to modify because they have only one owner.
Nevertheless, Tuesday's announcement coupled with recent and more aggressive strategies from the major retail banks are important steps to fix the housing crisis.
After more than a year of slow and weak initiatives, there appears to be a serious effort to get at the heart of the credit crisis: falling U.S. home prices and record foreclosures.
Citigroup announced late Monday it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments. The New York-based banking giant also said it is also working to expand the program to include mortgages for which the bank collects payments but does not own.
Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are on the verge of falling behind. This represents about one-third of all the mortgages that Citigroup owns, the bank said.
Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal or increasing the term of the loan.
Late last month, JPMorgan Chase & Co expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 customers.
The New York-based bank has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.
Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with 11 states in early October.
__
Associated Press Writers Deb Riechmann and Sara Lepro contributed to this report.
Housing agencies to widen homeowner help
By Patrick Rucker
WASHINGTON (Reuters) – The two largest U.S. mortgage finance companies will unveil a plan on Tuesday to cut monthly payments for struggling borrowers in the latest effort to reverse a wave of defaults threatening the economy.
Homeowners who face foreclosure and are spending more than 38 percent of their income on mortgage payments could have their monthly payments reduced by Fannie Mae and Freddie Mac, sources familiar with the plan said on Monday.
The two companies own or insure roughly half of U.S. home loans and the move is expected to provide relief for hundreds of thousands of borrowers.
The program is the latest in a series of what critics say have been piecemeal moves to address the record foreclosure rate and plummeting home prices.
The plan to be outlined on Tuesday was conceived in part by Hope Now, an industry group midwifed by Treasury Secretary Henry Paulson last year to help troubled borrowers stay in their homes.
Hope Now has spurred mortgage finance companies to ease terms for troubled borrowers but those voluntary efforts have not been enough to halt the growing pace of foreclosures.
"This idea of bringing mortgage companies to the table with mild political pressure and hope that they will aid borrowers has not worked and I hope today's program goes further," said John Taylor of the National Community Reinvestment Coalition that advocates for troubled borrowers.
Officials from the Federal Housing Finance Agency and the Treasury and representatives from the mortgage lending industry will hold a news conference on the plan at 2 p.m. EST.
Policy-makers hope the new plan will encourage other mortgage finance companies to show forbearance on troubled loans.
LOAN MODIFICATION MODEL
The plan is similar to one conceived by the Federal Deposit Insurance Corp to better match a troubled borrower's income with his monthly payments.
The FDIC turned IndyMac Bancorp Inc into a petri dish for such loan modifications when it seized the failed company in July.
FDIC Chairman Sheila Bair is not scheduled to take part in the event on Tuesday, which will take place at the offices of the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac.
Separately, the Department of Housing and Urban Development is considering expanding its aid program, Hope for Homeowners, under which HUD's Federal Housing Administration can tap a $300 billion kitty to underwrite failing loans, the sources said.
That program, which Congress approved in July, went into effect in October. However, it got off to a slow start and officials are eager to loosen the terms and cut some red tape to make it more appealing to mortgage companies.
Under the program in its current form, a mortgage finance company must have a home reappraised and then erase 10 percent of its value before the loan can win a government guarantee. Policy-makers are considering lowering that required write-off, sources said.
The HUD does not plan to announce a change to the Hope for Homeowners program on Tuesday, an agency spokesman said .
(Reporting by Patrick Rucker; Editing by Tom Hals)
Citigroup to help at-risk borrowers stay in homes
By SARA LEPRO, AP Business Writer
NEW YORK – Citigroup says it is imposing a moratorium on most foreclosures as part of a series of initiatives aimed at helping at-risk borrowers remain in their homes — making Citi the latest big bank to announce sweeping efforts to try to curtail losses from souring mortgages.
Citi said late Monday 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, 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 the bank services but does not own.
Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are deemed as potentially needing assistance to keep current with their payments. This represents about one-third of all the mortgages that Citigroup owns, the bank said.
Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal, or increasing the term of the loan, steps known in the mortgage industry as a workout.
Of the four biggest U.S. banks — Citigroup, JPMorgan Chase & Co., Bank of America
Corp. and Wells Fargo & Co. — Citi has been on the shakiest footing as a result of the mortgage crisis, reporting losses in the past four consecutive quarters while its rivals have managed to post profits. The steps announced Monday are designed to stem those losses.
"Typically the lender loses the most money when a house goes into foreclosure," said Barry Zigas, director of housing policy at the Consumer Federation of America. "(The lender) takes some kind of loss that's usually much greater than what they sacrificed through some kind of workout."
Sanjiv Das, chief executive of CitiMortgage, said, "It is in our interest that borrowers stay in their homes and actually make the payments."
Citi is targeting homeowners in geographic areas with higher-than-average unemployment and foreclosure rates, primarily in Arizona, California, Florida, Michigan, Ohio and Indiana, Das said. The program is expected to affect about $20 billion in mortgages.
"As the unemployment rate is starting to creep up on us, there is going to be increasing distress in the marketplace," Das said in an interview with The Associated Press. "It's not going to distinguish between what type of mortgage they have."
"There is a huge amount of anxiety among borrowers," he said. "We will reach out to them before they become delinquent."
Since early last year, Citigroup has helped about 370,000 families avoid foreclosure, representing more than $35 billion in loans, the bank said.
Citi has avoided negative amortization loans, option adjustable-rate mortgages, and other types of risky mortgages, defaults on which have skyrocketed since the start of the housing bust in the middle of last year. Still, the bank has nonetheless been hurt by the relentless downturn in housing that fed the mortgage and credit crisis, and in turn, the near-breakdown of the financial system.
With defaults mounting, other lenders, including JPMorgan and Bank of America, have also become more aggressive about modifications to mortgage agreements.
But a moratorium only solves so much, according to Zigas. "A moratorium on foreclosure will be effective at stopping foreclosure, it won't be effective at stopping the underlying reasons of why people are in trouble," he said.
By taking a proactive approach, Citigroup isn't waiting until it's too late to deal with delinquent borrowers, said Steve Curnutte, president of InsBank Mortgage in Nashville, Tenn. However, the problem is growing faster than most banks can handle, he said.
"It's nearly an insurmountable undertaking," said Curnutte. "The number of bad loans that they can modify using their resources is being quickly outstripped by the number of new loans that need to be modified."
More than 4 million American homeowners with a mortgage were at least one payment behind on their loans at the end of June, and 500,000 had started the foreclosure process, according to the most recent data from the Mortgage Bankers Association.
Late last month, JPMorgan expanded its workout program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The New York-based bank has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.
JPMorgan also said it will not put any loans into foreclosure as it implements the expanded program over the next 90 days.
Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with state officials in early October.
The government is also working on an ambitious plan to help around 3 million borrowers avoid foreclosure, but details have yet to be released.
By ALAN ZIBEL, AP Real Estate Writer
WASHINGTON – The government and the mortgage industry are launching the most sweeping effort yet to help troubled homeowners by speeding up the process for renegotiating hundreds of thousands of delinquent loans held by Fannie Mae and Freddie Mac.
The Federal Housing Finance Agency, which seized control of the two mortgage finance companies in September, announced the plan Tuesday along with officials from the Treasury Department, Wells Fargo & Co., the Department of Housing and Urban Development and Hope Now, an alliance of mortgage companies organized by the Bush administration last year.
It likely will have tremendous importance because Fannie Mae and Freddie Mac own or guarantee about half of U.S. home loans.
The approach, which goes into effect Dec. 15., "will be a standard for the industry to quickly move homeowners into long-term sustainable mortgages," said Neel Kashkari, the Treasury Department's assistant secretary for financial stability in prepared remarks.
To qualify, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 percent or more than the home is currently worth.
The interest rate would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses.
Another option is for loans to be extended from 30 years to 40 years, and for some of the principal amount to be deferred interest-free.
While lenders have beefed up their efforts to aid borrowers over the past year, their earlier efforts have not kept up with the worst housing recession in decades.
More than 4 million American homeowners, or 9 percent of borrowers with a mortgage were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.
Indeed, Tuesday's announcement comes too late for Troy Courtney, a 44-year-old San Francisco police officer.
He moved out of his home in Mill Valley, Calif., at the start of this month — taking his children, three dogs and one cat with him — after failing at several to attempts to get a loan modification or a short sale — where the lender agrees to receive less than the loan is worth.
Courtney worked overtime and tapped into his retirement account to try to catch up with two loans on his home. But in the end he couldn't convince Countrywide Financial, which managed the loan for Wells Fargo, to modify the loan.
"I feel like I missed the boat," he said of the new efforts to help more homeowners. "I'm just mad at the whole system."
One reason the problem has been so tough to solve for borrowers like Courtney is that the vast majority of troubled loans were packaged into complicated investments that have proven extremely difficult to unwind.
Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged and sold in slices to investors around the world.
The remaining 20 percent are "whole loans," which are easier to modify because they have only one owner.
Nevertheless, Tuesday's announcement coupled with recent and more aggressive strategies from the major retail banks are important steps to fix the housing crisis.
After more than a year of slow and weak initiatives, there appears to be a serious effort to get at the heart of the credit crisis: falling U.S. home prices and record foreclosures.
Citigroup announced late Monday it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments. The New York-based banking giant also said it is also working to expand the program to include mortgages for which the bank collects payments but does not own.
Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are on the verge of falling behind. This represents about one-third of all the mortgages that Citigroup owns, the bank said.
Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal or increasing the term of the loan.
Late last month, JPMorgan Chase & Co expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 customers.
The New York-based bank has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.
Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with 11 states in early October.
__
Associated Press Writers Deb Riechmann and Sara Lepro contributed to this report.
Housing agencies to widen homeowner help
By Patrick Rucker
WASHINGTON (Reuters) – The two largest U.S. mortgage finance companies will unveil a plan on Tuesday to cut monthly payments for struggling borrowers in the latest effort to reverse a wave of defaults threatening the economy.
Homeowners who face foreclosure and are spending more than 38 percent of their income on mortgage payments could have their monthly payments reduced by Fannie Mae and Freddie Mac, sources familiar with the plan said on Monday.
The two companies own or insure roughly half of U.S. home loans and the move is expected to provide relief for hundreds of thousands of borrowers.
The program is the latest in a series of what critics say have been piecemeal moves to address the record foreclosure rate and plummeting home prices.
The plan to be outlined on Tuesday was conceived in part by Hope Now, an industry group midwifed by Treasury Secretary Henry Paulson last year to help troubled borrowers stay in their homes.
Hope Now has spurred mortgage finance companies to ease terms for troubled borrowers but those voluntary efforts have not been enough to halt the growing pace of foreclosures.
"This idea of bringing mortgage companies to the table with mild political pressure and hope that they will aid borrowers has not worked and I hope today's program goes further," said John Taylor of the National Community Reinvestment Coalition that advocates for troubled borrowers.
Officials from the Federal Housing Finance Agency and the Treasury and representatives from the mortgage lending industry will hold a news conference on the plan at 2 p.m. EST.
Policy-makers hope the new plan will encourage other mortgage finance companies to show forbearance on troubled loans.
LOAN MODIFICATION MODEL
The plan is similar to one conceived by the Federal Deposit Insurance Corp to better match a troubled borrower's income with his monthly payments.
The FDIC turned IndyMac Bancorp Inc into a petri dish for such loan modifications when it seized the failed company in July.
FDIC Chairman Sheila Bair is not scheduled to take part in the event on Tuesday, which will take place at the offices of the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac.
Separately, the Department of Housing and Urban Development is considering expanding its aid program, Hope for Homeowners, under which HUD's Federal Housing Administration can tap a $300 billion kitty to underwrite failing loans, the sources said.
That program, which Congress approved in July, went into effect in October. However, it got off to a slow start and officials are eager to loosen the terms and cut some red tape to make it more appealing to mortgage companies.
Under the program in its current form, a mortgage finance company must have a home reappraised and then erase 10 percent of its value before the loan can win a government guarantee. Policy-makers are considering lowering that required write-off, sources said.
The HUD does not plan to announce a change to the Hope for Homeowners program on Tuesday, an agency spokesman said .
(Reporting by Patrick Rucker; Editing by Tom Hals)
Citigroup to help at-risk borrowers stay in homes
By SARA LEPRO, AP Business Writer
NEW YORK – Citigroup says it is imposing a moratorium on most foreclosures as part of a series of initiatives aimed at helping at-risk borrowers remain in their homes — making Citi the latest big bank to announce sweeping efforts to try to curtail losses from souring mortgages.
Citi said late Monday 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, 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 the bank services but does not own.
Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are deemed as potentially needing assistance to keep current with their payments. This represents about one-third of all the mortgages that Citigroup owns, the bank said.
Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal, or increasing the term of the loan, steps known in the mortgage industry as a workout.
Of the four biggest U.S. banks — Citigroup, JPMorgan Chase & Co., Bank of America
Corp. and Wells Fargo & Co. — Citi has been on the shakiest footing as a result of the mortgage crisis, reporting losses in the past four consecutive quarters while its rivals have managed to post profits. The steps announced Monday are designed to stem those losses.
"Typically the lender loses the most money when a house goes into foreclosure," said Barry Zigas, director of housing policy at the Consumer Federation of America. "(The lender) takes some kind of loss that's usually much greater than what they sacrificed through some kind of workout."
Sanjiv Das, chief executive of CitiMortgage, said, "It is in our interest that borrowers stay in their homes and actually make the payments."
Citi is targeting homeowners in geographic areas with higher-than-average unemployment and foreclosure rates, primarily in Arizona, California, Florida, Michigan, Ohio and Indiana, Das said. The program is expected to affect about $20 billion in mortgages.
"As the unemployment rate is starting to creep up on us, there is going to be increasing distress in the marketplace," Das said in an interview with The Associated Press. "It's not going to distinguish between what type of mortgage they have."
"There is a huge amount of anxiety among borrowers," he said. "We will reach out to them before they become delinquent."
Since early last year, Citigroup has helped about 370,000 families avoid foreclosure, representing more than $35 billion in loans, the bank said.
Citi has avoided negative amortization loans, option adjustable-rate mortgages, and other types of risky mortgages, defaults on which have skyrocketed since the start of the housing bust in the middle of last year. Still, the bank has nonetheless been hurt by the relentless downturn in housing that fed the mortgage and credit crisis, and in turn, the near-breakdown of the financial system.
With defaults mounting, other lenders, including JPMorgan and Bank of America, have also become more aggressive about modifications to mortgage agreements.
But a moratorium only solves so much, according to Zigas. "A moratorium on foreclosure will be effective at stopping foreclosure, it won't be effective at stopping the underlying reasons of why people are in trouble," he said.
By taking a proactive approach, Citigroup isn't waiting until it's too late to deal with delinquent borrowers, said Steve Curnutte, president of InsBank Mortgage in Nashville, Tenn. However, the problem is growing faster than most banks can handle, he said.
"It's nearly an insurmountable undertaking," said Curnutte. "The number of bad loans that they can modify using their resources is being quickly outstripped by the number of new loans that need to be modified."
More than 4 million American homeowners with a mortgage were at least one payment behind on their loans at the end of June, and 500,000 had started the foreclosure process, according to the most recent data from the Mortgage Bankers Association.
Late last month, JPMorgan expanded its workout program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The New York-based bank has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.
JPMorgan also said it will not put any loans into foreclosure as it implements the expanded program over the next 90 days.
Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with state officials in early October.
The government is also working on an ambitious plan to help around 3 million borrowers avoid foreclosure, but details have yet to be released.
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