This article first appeared in the St. Louis Beacon, Aug. 25, 2009 - CitiMortgage, based in O'Fallon, Mo., is slated to collect a share of more than $1 billion in taxpayer-funded incentives to modify its at-risk mortgages. The company is No. 5 on the Center for Public Integrity's list of the top 25 participants in the Home Affordable Modification Program (HAMP) started by the Obama administration in February.
In a press release Tuesday, CitiMortgage announced that its foreclosure prevention efforts successfully helped 108,000 U.S. mortgage holders avoid foreclosure during the second quarter of 2009. The company claimed a 12-to-1 success rate in helping its distressed borrowers in the U.S.
"CitiMortgage's main concern is to help as many of our distressed customers as we can with a solution that is appropriate for their individual financial circumstances and needs,'' said CEO Sanjiv Das in a statement. "We are encouraged by the success of our initiatives, and are dedicated to doing more. Many Americans are still struggling, which is why Citi remains committed to working with homeowners and partnering with national and local community leaders to provide the programs, resources and information necessary to keep distressed borrowers in their homes."
The company, which is the fourth largest mortgage-servicer in the U.S., started a series of foreclosure-prevention programs after Das was named CEO in July 2008. The company's participation in HAMP is one of those efforts.
CitiMortgage's parent group, Citigroup, has received about $45 billion in rescue funds from the government's Troubled Asset Relief Program since last fall. The mortgage incentive funds are separate from the TARP money.
Citing its "ongoing commitment to transparency," Citi releases quarterly reports on its foreclosure efforts and spending of TARP funds.
Rewarding bad behavior?
While proponents argue that financially prodding lenders into doing loan modifications ends up helping troubled homeowners, critics say that HAMP ends up benefitting lenders who were responsible for selling the bad loans in the first place.
"This is the classic case of the fireman who set the fire being paid to put out the fire," said Juli Niemann, a financial analyst with Smith, Moore and Co. of Clayton.
Niemann says the government's HAMP program is another in a series of bailouts that buy into a philosophy promoted by ex-bankers working in government that troubled financial institutions must be saved because they are too big to fail.
"It's just another confidence builder; we've got to do something. Don't just stand there and watch Rome burn,'' Niemann said. "So, first, let us bail out the banks and throw all the money at them and they will do what's in their economic best interest to renegotiate loans and try to prevent defaults. Right. It hasn't worked so far.''
Critics say it is questionable that HAMP is worth the billions in taxpayer funds it will cost, given that lenders are still not willing to modify or restructure loans in substantial ways that will allow homeowners to stay in their homes for the long term. And until the housing industry rights itself, the U.S. economy will continue to falter.
"We're still seeing huge numbers of [mortgage] delinquencies, and they're increasing,'' Niemann said. "We have 7 million houses on the market now.''
Still no end in sight for foreclosures
Nearly a year after the meltdown of major U.S. financial institutions, foreclosures remain at crisis levels on the Main Streets of America. The Mortgage Bankers Association reported last week that 13 percent of U.S. residential mortgages were either in foreclosure or at least one payment behind, a number expected to rise with unemployment levels. The group predicts that trend will continue through the end of 2010.
In Missouri, foreclosure numbers continued to decline in July, bucking the national trend, according to RealtyTrac, which compiles mortgage and foreclosure numbers. Last month, 3,175 Missouri properties received a foreclosure notice, down 9.6 percent from a year ago.
Nationally, 306,149 properties received some type of foreclosure notice in July, up 7 percent from June and 32 percent from July 2008. Illinois ranked fifth-highest in the nation with filings on 14,524 properties.
CitiMortgage
3,500: Number of employees who work at the company's headquarters in O'Fallon, down from 4,600 in 2007 when the sub-prime mortgage crisis started rolling. About 400 employees were laid off in O'Fallon during the past year, part of a staff reduction of 50,000 worldwide by CitiMortgage's parent company Citigroup.
406,542: Number of trial loan modification offers that have been extended to eligible borrowers by all servicers participating in the government's Home Affordable Modification Program (HAMP), through July 31, according to Treasury Department.
185,418: CitiMortgage borrowers, nationwide, who are 60 days or more behind on their mortgages and eligible for the HAMP program, according to the Treasury Department.
38,673: CitiMortgage borrowers, nationwide, offered trial modifications through the government HAMP program, as of July 31. This number represents an estimated 21 percent of eligible Citi borrowers who are 60 or more days behind on their loans.
6-to-1: Overall ratio of CitiMortgage borrowers in Missouri who received some type of foreclosure assistance from the lender to stay in their homes, outnumbering those who were foreclosed during the second quarter of 2009, according to a report published Tuesday by Citi. In Illinois, Citi borrowers who received some assistance outnumbered those who were foreclosed by approximately 10.7 to 1, the lender said.
4.7 percent: Nationally, the percentage of CitiMortgage-serviced loans that were 90 days or more past due at the end of the second quarter of 2009; that number was 3.7 percent at the end of 2008.
