Types of loan modifications from Citigroup

Many lenders and mortgage servicers, including Citigroup, have increased the number of loan modifications they are offerings homeowners that are outside of the federal government mortgage assistance programs. These types of alternative modifications are usually more successful as well. Recent reports by both private analysts as well as the government show that the number and quality of loan modifications that mortgage servicers make on their own are growing when compared with a year ago. These same studies show that the vast majority of modifications now being made are in fact reducing borrowers' payments, and this is most often by reducing interest rates and extending loan terms on the loans in question.

When a borrower contacts Citi for help, the bank will usually first refer people to the federal governments Home Affordable Modification Program (HAMP). They are walked through the process to determine if they are eligible for aid, will apply, and go through the process. After this review both the homeowner and Citigroup may decide that HAMP is not the best option, so they will then explore other options and programs for the borrower.

Citigroup loan modification options

As just some of the options that will be considered, homeowner will often be considered for Citi's alternative loan modification programs. They include the following:

Those homeowners who may be experiencing a short-term financial problem (such as a job loss or medical emergency) may be able to get a deferral on their home loan. This will in effect delay or suspend their monthly payments, and it can have the effect of lowering the borrowers monthly payment for a period of anywhere from 90 or 120 days.

Another option that Citigroup continues to offer as an alternative is an extension that allows for missed payments by the homeowner. Payments that the borrower missed paying may end up being be added on to the end of their loan term, so the homeowner has plenty of time to repay these.





A third option is one based lonely on the federal government mortgage programs. Those who don't qualify for the federal government assistance plans due to such “technicalities” such as documentation reasons may get an alternative modification from Citigroup with the same terms as the Obama plan modification.

So what this means that is that Citi will adjust the homeowners monthly mortgage payment to 31% of their pretax monthly income, so the payment becomes much more affordable. How this works is that first Citi will reduce the loans interest rate to as low as 2%. As another solution to the housing problem, if necessary, Citigroup will decide to extends the mortgage loan term to 40 years to provide much more time to repay it. Last, but not least, and if necessary, the bank may defer a portion of the principal on the home loan until the loan is paid off and at the same time they waive interest and any fees due on the deferred amount.

At the end of the day the impact to the homeowner will vary. Unfortunately sometimes loan modifications in early years resulted in higher payments for the homeowner who requested help as they made up for delinquent payments or escrow was established to pay back insurance or property taxes. As Citigroup has begun to address the needs of homeowners in this weak housing cycle, they will do all that they can to ensure that virtually all the mortgage payments that an individual needs to make are even less on a principal and interest basis.

The programs and alternative loans tend to be successful. For example, so called re default rates for loans serviced by Citi and modified between the fourth quarter of 2008 and 2009's fourth quarter did not exceed 32%. this is better than the Obama plan. In addition, they have also shown some improvement in last year's fourth quarter, so the alternative loan modification programs success rate continues to improve.



By Jon McNamara

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