Citigroup Halts Foreclosures as Govt. Unveils Latest Plan to Help Homeowners

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Citigroup announced that it would halt all foreclosure activities as it attempts to contact nearly 500,000 homeowners to rework their loans.

The plan could lead the bank to renegotiate more than $20 billion in mortgages. The move comes at the same time that the federal government announced new plans to help homeowners by reworking federally guaranteed loans.

Citigroup's announcement will increase the banks efforts to work with homeowners. According to the bank, they have already modified or worked out payment plans for 120,000 customers. Their new plan is designed to help more homeowners stay out of foreclosure, but it will not work for everyone.

To qualify for a workout with the bank, homeowners must actually live in their home and have sufficient income to afford any reduced payments that are negotiated. In addition to this, homeowners have to actively be attempting to work out a payment plan with the bank. This means that the homeowners who are contacted by the bank, either by phone or by mail, need to be responsive. Surprisingly, this has been a significant issue for all banks that have been trying work with borrowers. Many borrowers who get behind automatically assume that when their bank contacts them it is simply for collection purposes. Because of this they avoid calls and don't open mail.
The banks plan only affects loans owned by the bank. This means that many loans serviced by the bank will not qualify for a workout.
In addition to the Citigroup announcement, the federal government unveiled its new plan to help homeowners. The government will work with FannieMae, FreddieMac and lenders to modify mortgages so that homeowners' monthly payments don't exceed 38% of their monthly income.
Under the plan, lenders may defer the amount of principle owed on a loan, reduce interest rates and extend loan terms to as much as 40 years. Homeowners will eventually have to pay the entire principle amount owed but under the restructuring plan, they may be able to defer these payments long enough to make the monthly payments affordable.
Unfortunately, the governments plan does have some ridiculous restrictions associated with it. To qualify, homeowners must have less than 10% equity in their homes. Additionally, they must be at least 90 days past due on their payments. This means that only the most cash-strapped borrowers will qualify and only after they have ruined their credit.
Homeowners who accept help under the government plan should do some investigation first. Because principle payments may be deferred, homeowners could actually find themselves owing a lot more money to the bank than they thought they would once their home is sold.  And because the plan doesn't force banks to reduce the principle amount owed, many homeowners who qualify are likely to find themselves making payments for a house that it worth less than they actually owe. In these cases, the homeowner may actually be better off losing their home to foreclosure than they will be if they modify their loans.
By Guest Blogger: Jim Malmberg
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To Whom May be Concerned,

Being a victim of this mortgage crisis, as so many are, 'squatting' in our homes, living in diress and fear, has caused horrific damages mentally and physically and of course financially.
But, not only are the adults suffering, what about our children?
Our children are endurring this crisis as well, the effects on the children are troublesome, their ability to concentrate at school at school is affected, declining grades, as well as behavioral and emotioal issues.
Children are endurring these fear based issues and I am bothered that our government is not taking this into account.
It is not fair that kids are disrupted in such a negative format.
The fear our kids are living in isn't any different than their parents, it's all relative.
People need to stand up and fight for the well being of our children through this crisis, as stress and fear will only cause harm and potential troubles in many forms as they grow up.
It is not fair to our children, as they do not understand or have the ability to do anything about it.
Kids have a right to feel safe and be protected. Why are they not?
I believe the children affected by this mtg crisis, is devestating and their wellbeing is threatened.
My children are not the only children suffering. Our government needs to be aware as statistics will show a decline in educational levels as well as mental wellness and behavioral issues.

My name is Tracey Murphy, and I am a concerned parent who will do anything to provide support for our future adults....
Parents cant tend to their childrens needs when living in survival mode.


Tracey Murphy
CA make such a valid -great point. Thanks for taking the time to comment!

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