Citi to let people sleep in their houses


Citigroup (NYSE: C) is reusing an old advertising slogan: Citi never sleeps. I guess the idea is that since it operates in 100 countries there is always a Citi employee who's on the job. The latest result of all that 24x7 brain power is a plan to let some its customers sleep in their own houses instead of kicking them to the curb. Which people? The people who borrowed money from Citi to buy houses and who are struggling to pay back the loans.

I found out about this proposal yesterday, although I did not know the details, when a radio network asked me to comment on it for broadcast today. But the news was embargoed until midnight so I can now blog about it. Citi says it will put a moratorium on foreclosures for borrowers who pass three tests: they have enough income to make "affordable" mortgage payments; they are working "in good faith" to renegotiate the loan; and the mortgage pertains to their principal residence.

Citi plans to focus on $20 billion in mortgages in states with the biggest foreclosure concentration -- Arizona, California, Florida, Michigan, Ohio and Indiana. Citi will assign 600 salespeople to adjust mortgage rates, reduce principal, or increase the term of the loan. In the next six months, Citi will contact 500,000 people, a third of its total mortgage population, who are current on their payments but who might need help keeping current.

Is Citi's move more than just PR? There is not enough information to know. With four million people expected to enter foreclosure in the U.S., even if Citi's efforts stopped 500,000 foreclosures -- and this is probably a much higher level than Citi will actually achieve -- it would only make a modest dent in the overall problem. Furthermore, Citi's criteria probably apply to a fairly small number of borrowers, depending on how it defines an "affordable" payment. Moreover, it is unclear how much this program will cost Citi and what proportion of the foreclosures are merely delayed rather than avoided.

Nevertheless, it is commendable that Citi is trying to do something. Unfortunately, in the real world, trying is not doing. One only has to look at Citi's failed bid to buy Wachovia (NYSE: WB) to know that.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup stock and has no financial interest in the other securities mentioned.

Reader Comments (Page 1 of 1)

Symbol Lookup
IndexesChangePrice
DJIA-89.2312,801.23
NASDAQ-23.352,903.88
S&P 500-9.311,342.64

Last updated: February 10, 2012: 04:56 PM

Hot Stocks

General Electric

18.875-0.255(-1.33)

Alcoa

10.29-0.35(-3.29)

Apple Inc

493.42+0.25(+0.05)

Google Inc 'A'

605.91-5.55(-0.91)

Bank of America

8.07-0.11(-1.34)

Wal-Mart Stores

61.90-0.06(-0.10)

Exxon Mobil Corp

83.80-1.08(-1.27)

Ford

12.44-0.25(-1.97)

Citigroup

32.925-0.735(-2.18)

IBM

192.42-0.71(-0.37)

Yahoo

16.14+0.14(+0.88)

Starbucks

48.82-0.38(-0.77)

Microsoft

30.495-0.275(-0.89)

Home Depot

45.33+0.06(+0.13)

DailyFinance Headlines

Benzinga Headlines

TheFlyOnTheWall.com Headlines

BioHealth Investor Headlines

WalletPop Headlines

DailyFinance BlackBerry App

My Portfolios

Track your stocks here!

Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

BloggingStocks Partners

More from AOL Money & Finance

BioHealth Investor Headlines

Page Loaded in 1328911011348 ms.