Citigroup has joined Morgan Stanley Chase, the Federal Deposit Insurance Corporation (FDIC,) and a few other large banks in initiating an aggressive program to mitigate foreclosures of single family homes.

The bank said on Monday that it is putting a moratorium on both initiating new foreclosures and on completing the legal process against homeowners who are currently moving toward foreclosure. 

The moratorium will be available to homeowners if they meet several criteria; they must want to stay in their home, be willing to work in good faith with the bank to resolve their problems, and have the income to afford payments on a restructured mortgage.

The program will be available initially to borrowers whose mortgage loans are owned by Citigroup but the bank said it is working on expanding the program to include loans that it services for other investors.

The bank will also move proactively over the next six months to contact about one-half million homeowners, about one-third of the banks own borrowers, who are current on their mortgage payments now but are at risk of falling behind in the near future. 

Citigroup will attempt to restructure mortgage loans by reducing the principal of the loan, extending the amortization period, and/or adjusting interest rates.  Some 600 bank employees will be involved in the restructuring effort.



The new program is not based on altruism.  The bank has suffered greatly from the subprime crisis, losing a staggering amount of money in each of the last four quarters, much more than any of its principal rivals.  Citi's stock is trading only slightly above its 52-week low, closing Monday at $11.05.  During the spring of 2006 the stock was trading in the $55 range.

Like FDIC, Wells Fargo, Morgan Stanley Chase and even Wachovia which is soon to be absorbed by Wells Fargo have finally realized that working with borrowers to prevent foreclosures, while expensive in the short term, is ultimately less costly than taking, managing, and marketing the foreclosed homes.

The geographic focus of Citi's efforts will be, at least at first, on those areas where unemployment and foreclosure rates are high.  This will include Florida, Arizona, California, Michigan, Indiana, and Ohio.

The Associated Press reported that 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 were in some phase of foreclosure.