Yesterday, Citigroup Inc. (C) announced its commitment to participate in the second-lien program of the U.S. government’s Home Affordable Mortgage Program (HAMP).
Besides Citi, Bank of America Corp. (BAC), Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM) are also participating in the program.
The program is aimed at providing greater affordability to homeowners by modifying their payments on second mortgages and is part of the President Obama’s loan modification program.
The downturn in the housing market ultimately led the economy to a recession. Home prices plunged while defaults increased. Following this, the government implemented several programs targeted to solve the problems in the housing market. These include providing incentives to first-time home buyers and mortgage modification program such as the HAMP.
HAMP is set out to help up from millions of struggling homeowners at risk of foreclosure by working with their lenders to lower monthly mortgage payments. The program is part of the Making Home Affordable Program which was created by the Financial Stability Act of 2009.
However, in fear of not being repaid, lenders who extended second mortgages can prohibit a borrower’s effort to modify their primary mortgages and thereby create a trouble for the borrowers. So the second mortgage modification program would offer incentives to these lenders, providing second mortgages, to lower payments or eliminate such loans completely.
Citi is one of the first mortgage servicers to participate in the HAMP. The company has helped over 825,000 families avoid foreclosures since 2007.
Citi has introduced several programs to help such distressed families in the past. These include the Citi Homeowner’s Assistance Program and the Citi Unemployment Assist Program. Most recently, the company also launched the Citi Foreclosure Alternatives Program.
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