NEW YORK — Citigroup today plans to announce a six- month program to reach out to 500,000 high-risk mortgage customers who are current on their payments but someday might require loan modifications to stay in their homes.
Officials of the bank said it would focus on areas with high unemployment and where housing prices have fallen sharply, including California, Arizona, Florida, Michigan, Indiana and Ohio.
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 and the homeowner is working in good faith with Citi and has sufficient income to make affordable mortgage payments.
Borrowers whose credit ratings have dropped or who exhibit other signs of financial stress also might be contacted, said Mark Rodgers, a spokesman for the bank’s mortgage operations.
Citigroup owns about 1.5 million first and second mortgages with a combined balance of $175 billion.
It provides customer service on an additional 5 million mortgages totaling about $600 billion — loans that have been sold into the secondary market where investors trade mortgage bonds.
The outreach program initially will focus on Citi- owned loans. Bank officials said they were negotiating with investors to apply the program to loans the company services.
Consumer advocates point out that while many lenders talk about helping borrowers before they become delinquent, foreclosures nonetheless have soared to unseen levels.
Although Citigroup’s plan appears to be the most ambitious, it remains to be seen what effects it would generate, said Paul Leonard, California director of the Center for Responsible Lending.
“We certainly welcome creative efforts to contact borrowers, particularly before they get into trouble,” Leon ard said. “But the proof, as they say, is in the pudding.”
Citigroup’s announcement is the latest by major mortgage lenders beefing up loan modifications to limit the losses they are suffering on foreclosures.
The Associated Press contributed to this report.
