For many homeowners facing foreclosure, the cavalry is on the way. Citibank is putting up $20 billion to help homeowner facing foreclosure, that brings the total to $100 billion from three banks over the past few weeks, but will the cavalry get here before millions more Americans lose their homes?
Citibank is announcing $20 billion in help for clients facing foreclosure. It will allow homeowners who are behind on payments to pay no more than 38 percent of their total income towards their mortgage.
"We will not foreclose on you, if you are willing to work with us on good faith, if you live in your own home, we own your mortgage and you have a stable source of income to afford the modified payment," said Sanjiv Das, CEO, Citimortgage.
The decision to renegotiate follows similar measures by major lenders such as JP Morgan and Countrywide Financial. For borrowers, it's a chance to lower interest rates. Reduce principal or extend the term of the loan. For lenders, it makes sense, says Nick Atkeson, from San Francisco's Delta Force Capital. Take a situation where, for example, a bank forecloses on a $500,000 house in this depressed real estate market:
"They might only recover $250,000 - on the other hand if they change the terms of the loan with the borrower, the homeowner. They may find that they may be able to work out a deal where the homeowner is able to stay in the home and pay off on $400,000 of that loan," said Nick Atkeson, Delta Force Capital.
The Federal Housing Finance Agency, which took over Fannie Mae and Freddie Mac in September, is today announcing a plan to allow lenders to modify more delinquent loans by establishing criteria to speed up the process. Some say if you want to understand this new wave of aid from banks - follow the money.
"It's not a great sense of generosity from the banks - it's that they're being pragmatic, a wave of foreclosures is costly in its own right, and forces the banks to take big write downs on some of their mortgages," said Dennis Berman, editor, Wall Street Journal.
Four million American homeowners are at least one month behind on their mortgage payments.
There will be a foreclosure workshop, Saturday, November 15th, at 145 Lake Merced Boulevard in San Francisco.