CitiGroup Expands Loan Modification Program After FDIC Pressure

Citigroup is going to be expanded their FDIC Loan Modification Program after pressure from the FDIC. The current Citigroup loan modification program was not doing enough to curb foreclosures and help real homeowners.

The Old Citigroup Loan Modification Program

Previously, the loan modification program offered by Citigroup was limited only to homeowners who were 60 days past due, but now with the new FDIC pressure, Citigroup is going to be using the government’s “mod-in-a-box” program with all homes, regardless if they are past due, which should increase the likelihood of foreclosure by tremendous amounts.

The article says:

FDIC Chairman Sheila Bair insisted on Citigroup’s cooperation last November, when the bank sought $20 billion of bailout funds and $301 billion of asset guarantees on top of an earlier $25 billion infusion. President Barack Obama wants more- aggressive efforts to stem foreclosures, and may force banks to increase lending when they take government money.

“They seem to just try to coerce the industry into” the loan-modification program, said David Watts, a strategist at analysis firm CreditSights Inc. “They’re saying, ‘We want you to do this program, and we’re going to make sure you do it by helping you, possibly with money and possibly with a big fat stick.’”

Citigroup, which lost a record $18.7 billion last year, is under pressure to cut costs now that it has to pay $3.41 billion a year in dividends on the government’s preferred stake. The bank had to reduce its common-stock dividend to 1 cent from 16 cents as a condition of the second infusion. Chief Executive Officer Vikram Pandit in January announced a plan to overhaul the bank by splitting off insurance and consumer-finance businesses.

FDIC Plan Will Stabilize The Housing Market

Hopefully with this new plan, the goal is to stabilize the housing market and prevent future foreclosures from taking place.

Fannie Mae and Freddie Mac Loan Modification Programs

he housing-finance companies Fannie Mae and Freddie Mac, which were put under government control last September, are deploying methods similar to the FDIC’s program. Last week, the Federal Reserve adopted a “homeowner preservation policy” for mortgages acquired in the rescues of Bear Stearns Cos. and American International Group Inc.

In November, after a week in which Citigroup’s stock price plunged 60 percent, then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke agreed to provide a second round of bailout funds to the bank.

Bair initially withheld her approval for the deal, demanding that Citigroup agree to implement her agency’s mortgage- modification program.