Citigroup Inc.’s (C) initiatives in the U.S. to keep distressed borrowers in their homes have paid off. The loss-mitigation successes have outnumbered foreclosures completed by a ratio of more than 12 to 1 in the second quarter, compared with 6 to 1 reported six months ago.
Around 108,000 U.S. homeowners were helped by Citigroup to avoid potential foreclosures on loans totaling more than $16 billion. This was 30% higher then the prior quarter.
Citigroup has also increased its loss-mitigation staff by 1,400 year-to-date, while over 4,000 employees were trained by the company to deal with the Treasury’s Home Affordable Modification Program (HAMP). The call center facilities were also increased extensively.
As of July, the company has offered trial modifications through HAMP to over 40,000 borrowers. Since the beginning of the housing crisis in 2007, the company has helped approximately 625,000 U.S. homeowners to avoid potential foreclosure on mortgages totaling more than $67 billion, using various initiatives. Such initiatives include modifications, HAMP trial modifications, extensions, forbearances, reinstatements and other loss mitigation activities.
However, foreclosures and delinquencies continued to rise. The number of foreclosures in process for Citigroup-serviced loans increased about 10% from the first quarter, although foreclosures initiated decreased by 14%. Completed foreclosures rose by 5%. The Citigroup-serviced loans that are due over 90 days have increased to 4.7% as of June, from 3.9% in March 2009 and 2.6% in June 2008.
Nevertheless, the re-default rates for modified loans continued to decline. Around 6.54% of loans modified in the first quarter of 2009 were delinquent after 30 days, compared to 7.67% of loans adjusted in the fourth quarter and 10.86% of those modified in the third quarter.
We believe that Citigroup is right on track to mitigate the problem of the distressed homeowners. However, we expect the company to incur higher credit losses in the upcoming quarters as its restructuring process continues.
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